
10-K



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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 3, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from        to
Commission File Number: 001-36212
 
VINCE HOLDING CORP.
(Exact name of registrant as specified in its charter)
 







 
 
 


Delaware
 
75-3264870


(State or other jurisdiction ofincorporation or organization)
 
(I.R.S. EmployerIdentification No.)


500 5th Avenue—20th Floor
New York, New York 10110
(Address of principal executive offices) (Zip code)
(323) 421-5980
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 









 
 
 
 
 


Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered


Common Stock, $0.01 par value per share
 
VNCE
 
New York Stock Exchange


 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒    No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.











Large accelerated filer
 
☐
 
Accelerated filer
 
☐


Non-accelerated filer
 
☒
 
Smaller reporting company
 
☒


 
 
 
 
Emerging growth company
 
☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.   ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ☐     No   ☒
The aggregate market value of the registrant's Common Stock held by non-affiliates as of July 29, 2023, the last day of the registrant's most recently completed second quarter, was approximately $10.7 million based on a closing price per share of $2.90 as reported on the New York Stock Exchange on July 28, 2023. As of April 8, 2024, there were 12,507,431 shares of the registrant's Common Stock outstanding.
Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the registrant's 2023 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
 
 

 
Table of Contents
 










 
 
 
 
PageNumber
 


 
 
 
 
 
 


 
 
PART I
 
4
 


Item 1.
 
Business
 
4
 


Item 1A.
 
Risk Factors
 
9
 


Item 1B.
 
Unresolved Staff Comments
 
20
 


Item 1C.
 
Cybersecurity
 
20
 


Item 2.
 
Properties
 
21
 


Item 3.
 
Legal Proceedings
 
23
 


Item 4.
 
Mine Safety Disclosures
 
23
 


 
 
 
 
 
 


 
 
PART II
 
23
 


Item 5.
 
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
23
 


Item 6.
 
[Reserved] 
 
24
 


Item 7.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
24
 


Item 7A.
 
Quantitative and Qualitative Disclosures About Market Risk
 
38
 


Item 8.
 
Financial Statements and Supplementary Data
 
38
 


Item 9.
 
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
 
38
 


Item 9A.
 
Controls and Procedures
 
38
 


Item 9B.
 
Other Information
 
40
 


Item 9C.
 
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
 
40
 


 
 
 
 
 
 


 
 
PART III
 
40
 


Item 10.
 
Directors, Executive Officers and Corporate Governance
 
40
 


Item 11.
 
Executive Compensation
 
40
 


Item 12.
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
40
 


Item 13.
 
Certain Relationships and Related Transactions, and Director Independence
 
40
 


Item 14.
 
Principal Accountant Fees and Services
 
40
 


 
 
 
 
 
 


 
 
PART IV
 
40
 


Item 15.
 
Exhibits and Financial Statement Schedules
 
40
 


Item 16.
 
Form 10-K Summary
 
45
 


 
2

 
INTRODUCTORY NOTE
On November 27, 2013, Vince Holding Corp. ("VHC" or the "Company"), previously known as Apparel Holding Corp., closed an initial public offering ("IPO") of its common stock and completed a series of restructuring transactions (the "Restructuring Transactions") through which Kellwood Holding, LLC acquired the non-Vince businesses, which included Kellwood Company, LLC ("Kellwood Company"), from the Company. The Company continues to own and operate the Vince business, which includes Vince, LLC.
Prior to the IPO and the Restructuring Transactions, VHC was a diversified apparel company operating a broad portfolio of fashion brands, which included the Vince business. As a result of the IPO and Restructuring Transactions, the non-Vince businesses were separated from the Vince business, and the stockholders immediately prior to the consummation of the Restructuring Transactions (the "Pre-IPO Stockholders") (through their ownership of Kellwood Holding, LLC) retained the full ownership and control of the non-Vince businesses. 
On April 21, 2023, Vince, LLC, the Company's wholly owned indirect subsidiary, entered into an Intellectual Property Asset Purchase Agreement (the "Asset Purchase Agreement"), by and among Vince, LLC, ABG-Vince, LLC (f/k/a ABG-Viking, LLC) ("ABG Vince"), a newly formed indirect subsidiary of Authentic Brands Group, LLC, the Company and ABG Intermediate Holdings 2 LLC, whereby Vince, LLC sold its intellectual property assets related to the business operated under the Vince brand to ABG Vince at closing (the "Asset Sale"). The Company closed the Asset Sale on May 25, 2023.
For purposes of this Annual Report on Form 10-K (this "Annual Report"), the "Company," "we," and "our," refer to Vince Holding Corp. and our wholly owned subsidiaries, including Vince Intermediate Holding, LLC ("Vince Intermediate") and Vince, LLC. References to "Vince," "Rebecca Taylor" or "Parker" refer only to the referenced brands. References to "Kellwood" refer, as applicable, to Kellwood Holding, LLC and its consolidated subsidiaries (including Kellwood Company, LLC) or the operations of the non-Vince businesses after giving effect to the Restructuring Transactions and prior to the Kellwood Sale. 
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report, and any statements incorporated by reference herein, contain forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are indicated by words or phrases such as "may," "will," "should," "believe," "expect," "seek," "anticipate," "intend," "estimate," "plan," "target," "project," "forecast," "envision" and other similar phrases. Although we believe the assumptions and expectations reflected in these forward-looking statements are reasonable, these assumptions and expectations may not prove to be correct and we may not achieve the results or benefits anticipated. These forward-looking statements are not guarantees of actual results, and our actual results may differ materially from those suggested in the forward-looking statements. 
These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, including, without limitation: our ability to maintain the license agreement with ABG Vince; ABG Vince's expansion of the Vince brand into other categories and territories; ABG Vince's approval rights and other actions; our ability to maintain adequate cash flow from operations or availability under our revolving credit facility to meet our liquidity needs; restrictions on our operations under our credit facilities, our ability to realize the benefits of our strategic initiatives; our ability to improve our profitability, the execution of our customer strategy, our operating experience and brand recognition in international markets, ; the execution and management of our direct-to consumer business growth plans; our ability to make lease payments when due; our ability to maintain our larger wholesale partners; our ability to anticipate and/or react to changes in customer demand and attract new customers, including in connection with making inventory commitments; actual or perceived general economic conditions; our ability to remediate the identified material weakness in our internal control over financial reporting; our ability to comply with domestic and international laws, regulations and orders; increased scrutiny regarding our approach to sustainability matters and environmental, social and governance practices; our ability to remain competitive in the areas of merchandise quality, price, breadth of selection and customer service; the transition associated with the appointment of an interim chief executive officer, our ability to attract and retain key personnel; seasonal and quarterly variations in our revenue and income; further impairment of our goodwill, the protection and enforcement of intellectual property rights relating to the Vince brand, our ability to complete the wind down of the Rebecca Taylor business, our ability to mitigate system security risk issues, such as cyber or malware attacks, as well as other major system failures; our ability to optimize our systems, processes and functions; our ability to comply with privacy-related obligations; our ability to ensure the proper operation of the distribution facilities by third-party logistics providers; fluctuations in the price, availability and quality of raw materials; the extent of our foreign sourcing; our reliance on independent manufacturers; the ethical business and compliance practices of our independent manufacturers, our status as a “controlled company”, our status as a “smaller reporting company”; and other factors as set forth from time to time in our Securities and Exchange Commission filings, including those described in this Annual Report under the heading “Part I, Item 1A – Risk Factors”.  We intend these forward-looking statements to speak only as of the date of this Annual Report and we do not undertake to update or revise them as more information becomes available, except as required by law.
 
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PART I
ITEM 1. BUSINESS.
Overview
We are a global retail company that operates the Vince brand women's and men's ready to wear business.  Previously, the Company also owned and operated the Rebecca Taylor and Parker brands until the sale of the respective intellectual property was completed, as discussed below under "Recent Development". We serve our customers through a variety of channels that reinforce the brand images.
We have a select number of wholesale partners who account for a significant portion of our net sales. In fiscal 2023 and fiscal 2022, sales to one wholesale partner, Nordstrom Inc., accounted for more than ten percent of the Company's net sales. These sales represented 20% of fiscal 2023 and 16% of fiscal 2022 net sales, respectively. 
We design our products in the U.S. and source the vast majority of our products from contract manufacturers outside the U.S., primarily in Asia.
The Company operates on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52 or 53-week period ending on the Saturday closest to January 31.
•References to "fiscal year 2023" or "fiscal 2023" refer to the fiscal year ended February 3, 2024; and
•References to "fiscal year 2022" or "fiscal 2022" refer to the fiscal year ended January 28, 2023.
Fiscal year 2023 consisted of a 53-week period and fiscal year 2022 consisted of a 52-week period.
Our principal executive office is located at 500 5th Avenue, 20th Floor, New York, New York 10110, and our telephone number is (323) 421-5980. Our corporate website address is www.vince.com.
Recent Development
On April 21, 2023, Vince, LLC, the Company's wholly owned indirect subsidiary, entered into an Intellectual Property Asset Purchase Agreement (the "Asset Purchase Agreement"), by and among Vince, LLC, ABG-Vince, LLC (f/k/a ABG-Viking, LLC) ("ABG Vince"), a newly formed indirect subsidiary of Authentic Brands Group, LLC, the Company and ABG Intermediate Holdings 2 LLC, whereby Vince, LLC sold its intellectual property assets related to the business operated under the Vince brand to ABG Vince at closing (the "Asset Sale"). The Company closed the Asset Sale on May 25, 2023.
      See Part I, Item 1A. Risk Factors — "Risks Related to Our Business and Industry for additional discussion regarding risks to our business associated with the Asset Sale.
The Brand 
Vince
Vince Holding Corp. is a global retail company that operates the Vince brand women’s and men’s ready to wear business. Vince, established in 2002, is a leading global luxury apparel and accessories brand best known for creating elevated yet understated pieces for every day effortless style.  As of February 3, 2024, we operate 48 full-price retail stores, 15 outlet stores, the e-commerce site, vince.com, and the subscription service Vince Unfold, vinceunfold.com.  Vince is also available through premium wholesale channels globally.
Our wholesale business is comprised of sales to major department stores and specialty stores in the U.S. and in select international markets. We have distribution arrangements with a small number of wholesale partners for non-licensed product which has improved profitability in the wholesale business and enables us to focus on other areas of growth for the brand, particularly in the direct-to-consumer business. We continue to collaborate with our wholesale partners in various areas, including merchandising and logistics to build a more profitable and focused wholesale business.
Our direct-to-consumer business includes our company-operated retail and outlet stores and our e-commerce business. During fiscal 2023, we closed four net retail stores. The direct-to-consumer business also includes our e-commerce website, vince.com, and our subscription service, Vince Unfold, vinceunfold.com. 
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The following table details the number of Vince retail stores we operated for the past two fiscal years:
 












 
Fiscal Year
 


 
2023
 
 
2022
 


Beginning of fiscal year
 
67
 
 
 
68
 


Net (closed) opened
 
(4
)
 
 
(1
)


End of fiscal year
 
63
 
 
 
67
 


Rebecca Taylor
Rebecca Taylor, founded in 1996 in New York City, is a contemporary womenswear line lauded for its signature prints, romantic detailing and vintage inspired aesthetic, reimagined for a modern era. On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On December 22, 2022, Rebecca Taylor, Inc., the Company's indirectly wholly owned subsidiary, completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information. 
The Rebecca Taylor collection was previously available through retail stores and outlet stores, through its branded e-commerce site and through its subscription service Rebecca Taylor RNTD, as well as through major department and specialty stores in the U.S. and in select international markets. All Rebecca Taylor retail and outlet stores operated by the Company were closed as of January 28, 2023 and the e-commerce site operated by the Company ceased in December 2022.
The following table details the number of Rebecca Taylor retail stores we operated for the past two fiscal years:
 












 
Fiscal Year
 


 
2023
 
 
2022
 


Beginning of fiscal year
 
—
 
 
 
18
 


Net (closed) opened
 
—
 
 
 
(18
)


End of fiscal year
 
—
 
 
 
—
 


Parker
Parker, founded in 2008 in New York City, is a contemporary women's fashion brand that is trend focused. During the first half of fiscal 2020 the Company decided to pause the creation of new products to focus resources on the operations of the Vince and Rebecca Taylor brands. On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. 
The Parker collection was previously available through major department stores and specialty stores worldwide as well as through its e-commerce website.
Business Segments
We serve our customers through a variety of channels that reinforce the brand images. Our diversified channel strategy allows us to introduce our products to customers through multiple distribution points that are presented in three reportable segments: Vince Wholesale, Vince Direct-to-consumer, and Rebecca Taylor and Parker.
 





















 
 
Fiscal Year
 


(in thousands, except percentages)
 
2023
 
 
% of Total Net Sales
 
 
2022
 
 
% of Total Net Sales
 


Vince Wholesale
 
$
149,603
 
 
 
51.1
%
 
$
169,375
 
 
 
47.4
%


Vince Direct-to-consumer
 
 
143,096
 
 
 
48.9
%
 
 
149,770
 
 
 
41.9
%


Rebecca Taylor and Parker
 
 
191
 
 
 
0.0
%
 
 
38,297
 
 
 
10.7
%


Total net sales
 
$
292,890
 
 
 
100.0
%
 
$
357,442
 
 
 
100.0
%


Our Vince Wholesale segment is comprised of sales to major department stores and specialty stores in the U.S. and in select international markets. Until the Asset Sale closed, our Vince Wholesale segment also included our licensing business related to our licensing arrangements for our women's and men's footwear line, as well as soft accessories and cold weather goods.
Our Vince Direct-to-consumer segment includes our Vince company-operated retail and outlet stores, our Vince e-commerce business and our subscription service, Vince Unfold.
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Our Rebecca Taylor and Parker segment consisted of our operations to distribute Rebecca Taylor and Parker brand products to major department and specialty stores in the U.S. and select international markets and directly to the consumer through their own branded e-commerce platforms, our Rebecca Taylor retail and outlet stores and through our subscription service, Rebecca Taylor RNTD.  On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. Substantially all Rebecca Taylor inventory was liquidated as of January 28, 2023. Additionally, all Rebecca Taylor retail and outlet stores operated by the Company were closed as of January 28, 2023 and the e-commerce site operated by the Company ceased in December 2022. On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. 
Products
We believe that the Vince brand's differentiated design aesthetic and strong attention to detail and fit allow us to maintain premium pricing, and that the combination of quality and value positions us as an everyday luxury brand that encourages repeat purchases among our customers. 
The Vince women's collection includes seasonal collections of luxurious cashmere sweaters, silk blouses, a leather and suede collection that encompasses all classifications, and jackets, dresses, skirts, pants, t-shirts, footwear, outerwear, and accessories. The Vince men's collection includes cashmere sweaters, woven shirts, core and fashion pants, blazers, outerwear, footwear and accessories. 
Design and Merchandising
Our creative team is focused on developing and implementing the design direction for the Vince brand. Our design efforts are supported by well-established product development and production teams. We believe continued collaboration between design and merchandising will ensure we respond to consumer preferences and market trends with new innovative product offerings while maintaining the brand's fashion foundation.
Marketing, Advertising and Public Relations
We use marketing, advertising and public relations as critical tools to deliver a consistent and compelling message to consumers. The message and marketing strategies of the Vince brand are cultivated by dedicated creative, design, marketing, visual merchandising, and public relations teams. These teams work closely together to develop and execute campaigns that appeal to both our core and aspirational customers.
To execute our marketing strategies, we engage in a wide range of campaign tactics that include traditional media (such as direct mail, print advertising, cooperative advertising with wholesale partners and outdoor advertising), digital media (such as email, search, social, and display) and experiential campaigns (such as events) to drive traffic, brand awareness, conversion and ultimately sales across all channels. Our marketing strategies also include utilizing a customer data platform from which we are able to achieve improved segmentation and personalization for an enhanced customer experience. In addition, we use social platforms such as Instagram and Facebook as we further invest in leveraging micro and macro influencer networks to increase brand awareness, engage customers and create excitement about loyalty towards the Vince brand. The visits to vince.com also provide an opportunity to grow our customer base and communicate directly with our customers both on line and in stores.
See Part I, Item 1A. Risk Factors — "Risks Related to Our Business and Industry — We may be unable to effectively execute our customer strategy."
Our public relations team conducts a wide variety of press activities to reinforce the brand image and create excitement around the Vince brand. Our apparel has appeared in the pages of major fashion magazines such as Vogue, Harper's Bazaar, Elle, InStyle, GQ, Esquire and WSJ. Well-known trend setters in entertainment and fashion are also regularly seen wearing the brand.
Sourcing and Manufacturing
We do not own or operate any manufacturing facilities. We contract for the purchase of finished goods with manufacturers who are responsible for the entire manufacturing process, including the purchase of piece goods and trim. Although we do not have long-term written contracts with manufacturers, we have long-standing relationships with a diverse base of vendors which we believe to be mutually satisfactory. We work with more than 25 manufacturers across 10 countries, with 79% of our products produced in China in fiscal 2023. For cost and control purposes, we contract with select third-party vendors in the U.S. to produce a small portion of our merchandise. 
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All of our garments are produced according to our specifications, and we require that all of our manufacturers adhere to strict regulatory compliance and standards of conduct. Our vendors' factories are monitored by our production team to ensure quality control, and they are monitored by independent third-party inspectors we employ for compliance with local manufacturing standards and regulations on an annual basis. We also monitor our vendors' manufacturing facilities regularly, providing technical assistance and performing in-line and final audits to ensure the highest possible quality.
Distribution Facilities
As of February 3, 2024, we operated out of three distribution centers, one located in the U.S., one in Hong Kong and one in Belgium. 
Our warehouse in the U.S., located in California, is operated by a third-party logistics provider and includes dedicated space to fulfilling orders to support our wholesale partners, retail locations and e-commerce business and utilizes a warehouse management system that is fully customer and vendor compliant. 
Our warehouse in Hong Kong is operated by a third-party logistics provider and supports our wholesale orders for international customers located primarily in Asia. 
Our warehouse in Belgium is operated by a third-party logistics provider and supports our Vince wholesale orders for international customers located primarily in Europe and our Vince UK store.
We believe we have sufficient capacity in our domestic and international distribution facilities to support our current and projected business.
Information Systems
During fiscal 2021, we completed the rollout of a new point of sale ("POS") system for the Vince brand to expand our omni-channel capabilities to promote direct-to-consumer growth and enhance the customer engagement and shopping experience. During fiscal 2022, we completed the implementation of a customer data platform and the front-end re-platforming of our Vince e-commerce website. Our continued strategy includes investing in customer facing technologies to further expand our omni-channel capabilities and to further consolidate systems over time to create operational efficiencies and to achieve a common platform across the Company. 
See Part I, Item 1A. Risk Factors — "Risks Related to Our Information Technology and Security — We are continuing to adopt, optimize and improve our information technology systems, processes and functions. If these systems, processes, and functions do not operate successfully, our business, financial condition, results of operations and cash flows could be materially harmed" and Part II, Item 9A. "Controls and Procedures." 
Seasonality
The apparel and fashion industry in which we operate is cyclical and, consequently, our revenues are affected by general economic conditions and the seasonal trends characteristic to the apparel and fashion industry. Purchases of apparel are sensitive to a number of factors that influence the level of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt, interest rates and consumer confidence as well as the impact of adverse weather conditions. In addition, fluctuations in the amount of sales in any fiscal quarter are affected by the timing of seasonal wholesale shipments and other events affecting direct-to-consumer sales. As such, the financial results for any particular quarter may not be indicative of results for the fiscal year. We expect such seasonality to continue.
Competition
We face strong competition in each of the product categories and markets in which we compete on the basis of style, quality, price, and brand recognition. Some of our competitors have achieved significant recognition for their brand names or have substantially greater financial, marketing, distribution and other resources compared to us. However, we believe that we have established a sustainable and distinct position in the current marketplace, driven by a product assortment that combines classic and fashion-forward styling, and a pricing strategy that offers customers accessible luxury. 
 
 
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Human Capital
As of February 3, 2024, we had 579 employees, of which 355 were employed in our company-operated retail stores. Except for 8 employees in France, who are covered by collective bargaining agreements pursuant to French law, none of our employees are currently covered by a collective bargaining agreement and we believe our employee relations are good.
Our key human capital measures include associate turnover, pay equity, and professional development as well as safety. We have programs in place to provide associates with feedback on performance and professional development, including our formal annual performance review process. We frequently benchmark our compensation and benefits practices against comparable peers and assess them, so we continue to attract and retain talent throughout our organization.
We strive to maintain an inclusive environment free from discrimination of any kind. Associates have multiple ways to report inappropriate behavior, including through a confidential hotline. All reports of inappropriate behavior are promptly investigated with appropriate action taken to stop such behavior.
Trademarks and Licensing
On April 21, 2023, Vince, LLC, the Company's wholly owned indirect subsidiary, entered into the Asset Purchase Agreement, by and among Vince, LLC, ABG Vince, a newly formed indirect subsidiary of Authentic Brands Group, LLC, the Company and ABG Intermediate Holdings 2 LLC, whereby Vince, LLC sold its intellectual property assets related to the business operated under the Vince brand to ABG Vince at closing. The Company closed the Asset Sale on May 25, 2023 (the “Closing”).
On May 25, 2023, in connection with the Closing, Vince, LLC and ABG Vince entered into a License Agreement (the “License Agreement”), which provides Vince, LLC with a license to use the Licensed Property in the Territory, which is defined as the United States, Canada, Andorra, Austria, Germany, Switzerland, Belgium, Netherlands, Luxembourg, France, Monaco, Liechtenstein, Italy, San Marino, Vatican City, Iceland, Norway, Denmark, Sweden, Finland, Spain, Portugal, Greece, Republic of Cyprus (excluding Northern Cyprus), United Kingdom, Ireland, Australia, New Zealand, Mainland China, Hong Kong, Macau, Taiwan, Singapore, Japan and Korea (the "Core Territory"), together with all other territories (the "Option Territory," together with the Core Territory, the “Territory”), to the Approved Accounts (each as defined in the License Agreement). The Option Territory may be changed unilaterally by ABG Vince at any time after the effective date of the License Agreement. The License Agreement also provides Vince, LLC with a license to operate the Vince e-commerce site, www.vince.com, as well as to operate all retail stores in the Territory. Vince, LLC is required to operate and maintain a minimum of 45 Retail Stores and Shop-in-Shops in the Territory. 
Additionally, the License Agreement provides Vince, LLC with a license to use the Licensed Property in the Territory to design, manufacture, promote, market, distribute, and sell ready-to-wear Sportswear Products and Outerwear Products (the "Core Products") and Baby Layettes (the "Option Products," together with the Core Products, the "Licensed Products"), which Option Products may be changed unilaterally by ABG Vince at any time after the effective date of the License Agreement. 
The initial term of the License Agreement began on May 25, 2023, the date on which the Closing actually occurred, and ends at the end of the Company's 2032 fiscal year, unless sooner terminated pursuant to the terms of the License Agreement. Vince, LLC has the option to renew the License Agreement on the terms set forth in the License Agreement for eight consecutive periods of ten years each, unless the License Agreement is sooner terminated pursuant to its terms or Vince, LLC is in material breach of the License Agreement and such breach has not been cured within the specified cure period. Vince, LLC may elect not to renew the term for a renewal term. 
Vince, LLC is required to pay ABG Vince a royalty on net sales of Licensed Products and committed to an annual guaranteed minimum royalty of $11,000 and annual minimum net sales as specified in the License Agreement, in each case, during the initial term of the License Agreement, except that the guaranteed minimum royalty and minimum net sales for the first contract year during the initial term will be prorated to the period beginning on the Closing Date and ending at the end of the Company's 2023 fiscal year. The annual guaranteed minimum royalty and annual minimum net sales for each subsequent renewal term will be the greater of (i) a percentage as set forth in the License Agreement of the guaranteed minimum net royalty or the minimum net sales (as applicable) of the immediately preceding contract year, and (ii) the average of actual Royalties (as defined in the License Agreement, with respect to the guaranteed minimum royalty) or actual Net Sales (as defined in the License Agreement, with respect to the annual minimum net sales) during certain years as set forth in the License Agreement of the preceding initial term or renewal term (as applicable). Vince, LLC is required to pay royalties comprised of a low single digit percentage of net sales arising from retail and e-commerce sales of Licensed Products and a mid single digit percentage of net sales arising from wholesale sales of such Licensed Products.  In the event that the annual guaranteed minimum royalty paid to ABG Vince in any given contract year is greater than the actual royalties earned by ABG Vince in the same contract year, the difference between the royalty actually earned and the annual guaranteed minimum royalty paid is credited for the next two contract years against any amount of royalty earned by ABG Vince in excess of the annual guaranteed minimum royalty paid during each such contract year, if any.
On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands.
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On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information.
Available Information
We make available free of charge on our website, vince.com, copies of our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after filing such material electronically with, or otherwise furnishing it to, the SEC. The SEC maintains a website at sec.gov that contains reports, proxy and information statements and other information regarding the Company and other companies that electronically file materials with the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this Annual Report.
ITEM 1A. RISK FACTORS. 
The following risk factors should be carefully considered when evaluating our business in addition to the forward-looking statements included elsewhere in this Annual Report. See "Disclosures Regarding Forward-Looking Statements." Any of the following factors could materially adversely affect our business, results of operations and financial condition. Additional risks and uncertainties not currently known to us or that we currently view as immaterial may also materially adversely affect our business, results of operations and financial condition. All amounts disclosed are in thousands except shares, per share amounts, percentages, stores, and number of leases.
 
Risks Related to Our Business and Industry
 
The failure to maintain our license agreement relating to the Vince brand would cause us to lose all our revenues.
On May 25, 2023, Vince, LLC, the Company's wholly owned indirect subsidiary, sold all its intellectual property assets related to the business operated under the Vince brand to ABG Vince, an indirect subsidiary of Authentic Brands Group, LLC ("Authentic”), pursuant to the Asset Purchase Agreement, entered into by and among Vince, LLC, ABG Vince, the Company and ABG Intermediate Holdings 2 LLC. Simultaneously with the Asset Sale, Vince, LLC entered into a license agreement (as amended from time to time, the "License Agreement") with ABG Vince which provides us with a license to use the Licensed Property in the Territory (as defined in the License Agreement) in the Territory, which is defined as the United States, Canada, Andorra, Austria, Germany, Switzerland, Belgium, Netherlands, Luxembourg, France, Monaco, Liechtenstein, Italy, San Marino, Vatican City, Iceland, Norway, Denmark, Sweden, Finland, Spain, Portugal, Greece, Republic of Cyprus (excluding Northern Cyprus), United Kingdom, Ireland, Australia, New Zealand, Mainland China, Hong Kong, Macau, Taiwan, Singapore, Japan and Korea (the "Core Territory"), together with all other territories (the "Option Territory,” together with the Core Territory, the “Territory”), which Option Territory may be changed unilaterally by ABG Vince at any time after the effective date of the License Agreement. Additionally, we may use in the Territory, the Licensed Property in the Territory to design, manufacture, promote, market, distribute, and sell ready-to-wear sportswear products and outerwear products (the "Core Products") and home décor and baby layettes (the "Option Products," together with the Core Products, the "Licensed Products"), which Option Products may be changed unilaterally by ABG Vince at any time after  the effective date of the License Agreement. The License Agreement has an initial term of ten years with eight options to renew for a ten-year period each.
Our revenues are generated solely from sales of products pursuant to the license granted under the License Agreement. We are required under the License Agreement, among other things, to achieve specified minimum net sales, make specified royalty payments, spend specified advertising and promotion expenditures, and maintain a minimum number of retail stores. If we do not satisfy any of the material requirements of the License Agreement, ABG Vince has the right to terminate the license or not renew the License Agreement. The failure to maintain or renew the License Agreement will cause us to lose all our revenues and have a material adverse effect on our results of operations.
Our business is impacted by ABG Vince's expansion of the Vince brand into other categories and territories.
Under the License Agreement, ABG Vince may produce and sell Vince products other than the Licensed Products and operate the Vince brand in Option Territories into which it may decide to enter in the future.  ABG Vince may do so by granting additional licenses to other third parties. For example, in August 2023, ABG Vince granted to a third party licensee a license to use the Licensed Property in the Territory to manufacture and distribute men’s tailored clothing and accessories across the US and Canada. We are unable to control the business strategies of ABG Vince relating to the expansion of the Vince brand outside of the license granted to us under the License Agreement, including how those strategies impact our own business strategies, the quality of products produced by 
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other Vince brand licensees as well as how the overall Vince brand image may evolve. If there is a change in the parameters of the Vince brand's design, pricing, distribution, target market or competitive set as a result of the brand's expansion into other categories and territories, we may be unable to maintain our historical product design and marketing direction or appeal to the brand's customer base as originally intended and our results of operations could be materially and adversely affected.
 
Our business is subject to ABG Vince's approval rights and other actions.
Under the License Agreement, ABG Vince has broad approval rights at its sole good faith discretion, including over, among other things, design direction of Licensed Products and marketing strategies, as well as any addition of new customer accounts and new retail locations. In addition, ABG Vince may remove any customer account that was pre-approved at the time of the closing of the Asset Sale if using its good faith, commercially reasonable judgment, it believes that such account is no longer consistent with the brand positioning for the Licensed Property. If ABG Vince chooses to exercise any of these approval rights, we may be unable to operate our business as intended. Furthermore, as part of the Asset Sale, our license agreements, including our e-commerce website domain name license, were sold to ABG Vince.  ABG Vince will be required to maintain such license agreements going forward, and its failure to do so could materially and adversely affect our business and operations. Lastly, Vince, LLC's governance rights as a minority equity holder of ABG Vince are limited and therefore, ABG Vince could choose to take corporate actions that would materially and negatively impact the results of operations of ABG Vince, which could in turn adversely affect the amount of cash available for distribution to Vince, LLC.
 
Our ability to continue to have the liquidity necessary to service our debt, meet contractual payment obligations, including royalty payments under the License Agreement, and fund our operations depends on many factors, including our ability to generate sufficient cash flow from operations, maintain adequate availability under our 2023 Revolving Credit Facility (as defined below) or obtain other financing.
Our ability to timely service our indebtedness, meet contractual payment obligations, including royalty payments under the License Agreement, and to fund our operations will depend on our ability to generate sufficient cash, either through cash flows from operations, borrowing availability under the 2023 Revolving Credit Facility or other financing. While we expect to meet our monthly Excess Availability (as defined in the 2023 Revolving Credit Facility Agreement) covenant and believe that our other sources of liquidity will generate sufficient cash flows to meet our obligations for the next twelve months, the foregoing expectation is dependent on a number of factors, including, among others, our ability to generate sufficient cash flow from operations, our ongoing ability to manage our operating obligations, the results of any future inventory valuations and the potential borrowing restrictions imposed by our lenders based on their credit judgment, which could materially and negatively impact our borrowing capacity, the wind down of the Rebecca Taylor business, as well as macroeconomic factors. In the event that we are unable to timely service our debt, meet other contractual payment obligations or fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness before maturity, seek waivers of or amendments to our contractual obligations for payment, reduce or delay scheduled expansions and capital expenditures, liquidate inventory through additional discounting, sell material assets or operations or seek other financing opportunities. There can be no assurance that these options would be readily available to us and our inability to address our liquidity needs could materially and adversely affect our operations and jeopardize our business, financial condition and results of operations, including a default under the 2023 Revolving Credit Facility which could result in all amounts outstanding under such facility becoming immediately due and payable.
Our operations are restricted by our credit facilities.
Our credit facility contains significant restrictive covenants. The 2023 Revolving Credit Facility includes covenants that may impair our financing and operational flexibility and make it difficult for us to react to market conditions and satisfy our ongoing capital needs and unanticipated cash requirements.
Specifically, such covenants significantly restrict our ability and, if applicable, the ability of our subsidiaries to, among other things: incur additional debt; make certain investments and acquisitions; enter into certain types of transactions with affiliates; use assets as security in other transactions; pay dividends; sell certain assets or merge with or into other companies; guarantee the debt of others; enter into new lines of businesses; make capital expenditures; prepay, redeem, or exchange our debt; and form any joint ventures or subsidiary investments.
Our ability to comply with the covenants and other terms of our debt obligations will depend on our future operating performance. If we fail to comply with such covenants and terms, and are unable to cure such failure under the terms of our credit facilities, if applicable, we would be required to obtain additional waivers from our lenders to maintain compliance with our debt obligations. If we are unable to obtain any necessary waivers and the debt is accelerated, a material adverse effect on our financial condition and future operating performance would likely result.
 
 
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We may not be able to realize the benefits of our strategic initiatives.
Our business growth depends on the successful execution of our strategic initiatives of our business. The success of our strategic initiatives depends on a number of factors, including our ability to execute and realize the enhanced profitability expectations of our planned transformation program, position our retail and e-commerce businesses for further strategic growth, particularly through enhancement of our customer data platform to drive greater loyalty and conversion and capture broader customer base, expand our presence internationally including in Asia and Europe, grow men's business, our ability to properly identify appropriate future growth opportunities, and other macroeconomic impacts on our business. There can be no assurance that the strategic initiatives would produce intended positive results, particularly as we adapt to the new operational landscape as a result of the Asset Sale and the entry into the License Agreement. If we are unable to realize the benefits of the strategic initiatives, our financial conditions, results of operations and cash flows could be materially and adversely affected.
We may be unable to improve our profitability.
We expect a negative impact on our operating and net income resulting from the royalty payments under the License Agreement as well as the loss of our footwear and soft accessories licenses as a result of the Asset Sale. We plan to offset such negative impact by driving margin expansion through disciplined cost management and reduced promotional activity, particularly through our transformation program. There is no assurance that we will be successful in implementing this strategy as such success depends on a number of factors, such as our ability to properly identify and execute cost management initiatives and macroeconomic factors that could impact our promotional cadence. If we are unable to implement the strategy to drive margin expansion, we may not be able to offset the negative impact on our financial results and our profitability may not improve as intended.
 
We may be unable to effectively execute our customer strategy.
One of our strategic priorities is to utilize a customer data platform and marketing strategy from which we will be able to drive customer initiatives underpinned by data and technology, creating improved segmentation and personalization for an enhanced customer experience both domestically and internationally. This will require significant investment in technology and infrastructure, as well as an increased reliance on leveraging micro and macro influencer networks to increase brand awareness and loyalty through social media and the digital dissemination of advertising campaigns. We must keep up to date with other competitive technology trends, including the use of innovative technology, creative and attractive user interfaces, and other e-commerce marketing tools such as paid search and mobile applications, among others, which may increase our costs as well as our exposure to legal and reputational liability for online content, but may not succeed in increasing sales or attracting new customers. Any failure on our part to effectively execute on our strategy to enhance our customers' experience and realize the expected return on our investment in these initiatives could negatively affect sales as well as the reputation of the brands, which could adversely impact our growth and profitability.
 
Our limited operating experience and brand recognition in international markets may delay our expansion strategy and cause our business and growth to suffer.
We face risks with respect to our strategy to expand internationally, including our efforts to further expand our business in Asia and Europe through company-operated locations, wholesale arrangements as well as with international partners. Our current operations are based largely in the U.S., with international wholesale sales representing approximately 8% of net sales for fiscal 2023. Therefore, we have a limited number of customers and experience in operating outside of the U.S. We also do not have extensive experience with regulatory environments and market practices outside of the U.S. and cannot guarantee that we will be able to penetrate or successfully operate in any market outside of the U.S. Many of these markets also have different operational characteristics, including employment and labor regulations, transportation, logistics, real estate (including lease terms) and local reporting or legal requirements, and the impact on the international markets remains unclear. In addition, pursuant to the License Agreement, our exclusive license to operate the Vince brand may be limited by the terms of the License Agreement. Some of the regions in which we currently operate are designated as Option Territories, including the Middle East and Latin America. If Authentic chooses to operate in these Option Territories, we become unable to directly operate in those areas.
In fiscal 2021, we commenced a strategy to expand our international retail and e-commerce presence in China and a select list of neighboring countries in Asia via a joint venture arrangement. We are in the initial stages of establishing this relationship and there can be no guarantee that it will materialize. Further, we may face counterparty and/or operational risks as this joint venture arrangement makes us susceptible to the actions of our third-party partner. Our joint venture partner may have views that differ or conflict with ours, such as the timing of new store openings and the pricing of our products, or our partner may become bankrupt, which may as a practical matter subject us to our partner's liabilities in connection with the joint venture. Although we have sought and generally will seek to maintain sufficient control of any investment to permit our objectives to be achieved, we might not be able to take certain actions without the approval of our partners. Reliance on joint venture relationships and our partners exposes us to increased risk that our joint ventures will not be successful and will result in competitive harm to the brand image that could cause our expansion efforts, profitability and results of operations to suffer.
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One of our strategic initiatives is to focus on our direct-to-consumer business, which includes opening retail stores in select locations under more favorable and shorter lease terms and operating and maintaining our new and existing retail stores successfully. If we are unable to execute this strategy in a timely manner, or at all, our financial condition and results of operations could be materially and adversely affected.
As part of our strategy to increase focus on our direct-to-consumer business, we continue to seek retail opportunities in targeted streets or malls with desirable size and adjacencies, typically near luxury retailers that we believe are consistent with our key customers' demographics and shopping preferences, and seek to negotiate more favorable leases including shorter terms. The success of this strategy depends on a number of factors, including the identification of suitable markets and sites, negotiation of acceptable lease terms while securing those favorable locations, including desired term, rent and tenant improvement allowances, and if entering a new market, the timely achievement of brand awareness and proper evaluation of the market particularly for locations with shorter term, affinity and purchase intent in that market, as well as our business condition in funding the opening and operations of stores. In addition, under the License Agreement, we are required to maintain a minimum number of retail locations as well as obtain prior approval from ABG Vince with respect to new retail locations which may be provided at its sole good faith discretion. We may be unable to execute this strategy as intended if ABG Vince chooses to withhold such approval. Furthermore, we may not be able to maintain the successful operation of our retail stores if the areas around our existing retail locations undergo changes that result in reductions in customer foot traffic or otherwise render the locations unsuitable, such as economic downturns in the area, changes in demographics and customer preferences, and the closing or decline in popularity of adjacent stores.
As of February 3, 2024, we operated 63 stores, including 47 company-operated Vince full-price stores and 15 company-operated Vince outlet stores throughout the United States and one company-operated Vince full price store in the United Kingdom.
During fiscal 2022, we recorded non-cash asset impairment charges of $1,880 within Impairment of long-lived assets on the Consolidated Statements of Operations and Comprehensive Income(Loss) related to the impairment of property and equipment and operating lease right-of-use assets of certain retail stores with carrying values that were determined not to be recoverable and exceeded their fair value. We may in the future record further impairments of these assets.
We are subject to risks associated with leasing retail and office space, are historically subject to long-term non-cancelable leases and are required to make substantial lease payments under our operating leases, and any failure to make these lease payments when due would likely harm our business, profitability and results of operations.
We do not own any of our stores or our offices, including our New York, Los Angeles or Paris offices and showroom spaces, but instead lease all of such space under operating leases. Substantially all of our leases require a fixed annual rent, and most require the payment of additional rent if store sales exceed a negotiated amount. Most of our leases are “net” leases, which require us to pay the cost of insurance, taxes, maintenance, and utilities.  Some of our leases are subject to initial terms that are as long as 10 years, and we generally cannot cancel these leases solely at our option. Additionally, certain of our leases allow the lessor to terminate the lease if we do not achieve a specified gross sales threshold. There can be no assurance that we will be able to achieve these required thresholds and in the event we are not able to do so, we may be forced to find an alternative store location and may not be successful in doing so. Any loss of our store locations due to underperformance may harm our results of operations, stock price and reputation.
Payments under these leases account for a significant portion of our selling, general and administrative expenses. For example, as of February 3, 2024, we were a party to 67 operating leases associated with our retail stores and our office and showroom spaces requiring future minimum lease payments of $22,006 in the aggregate through fiscal 2024 and $84,140 thereafter. Any new retail stores leased by us under operating leases will further increase our operating lease expenses, and some of those stores may require significant capital expenditures. We depend on cash flows from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our credit facilities or from other sources, we may not be able to service our operating lease expenses, grow our business, respond to competitive challenges or fund our other liquidity and capital needs, which would harm our business. In addition, we may remain obligated under the applicable lease for, among other things, payment of the base rent for the remaining lease term, even after the space is exited or otherwise closed (such as our temporary store closures resulting from the COVID-19 pandemic). Such costs and obligations related to the early or temporary closure of our stores or termination of our leases could have a material adverse effect on our business, results of operations, and financial condition.
If an existing or future store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among others, paying the base rent for the balance of the lease term if we cannot negotiate a mutually acceptable termination payment.  In fiscal 2024, 15 of our existing store leases will expire, many for which we have already extended or secured an alternative location. As our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, or to find a suitable alternative location, which could cause us to close stores in desirable locations or in the case of office leases, incur costs in relocating our office space. 
 
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A substantial portion of our revenue is derived from a small number of large wholesale partners, and the loss of any of these wholesale partners could substantially reduce our total revenue.
We historically had and continue to have a small number of wholesale partners who account for a significant portion of our net sales. Our consolidated net sales to the full-price, off-price and e-commerce operations of our largest wholesale partner comprised 20% of our total revenue for fiscal 2023. We do not have formal written agreements with any of our wholesale partners and purchases generally occur on an order-by-order basis. A decision by any of our major wholesale partners, whether motivated by marketing strategy, competitive conditions, financial difficulties or otherwise, to significantly decrease the amount of merchandise purchased from us, or to change their manner of doing business with us, could substantially reduce our revenue and have a material adverse effect on our profitability. In addition, due to the concentration of and/or ownership changes in our wholesale partner base, our results of operations could be adversely affected if any of these wholesale partners fails to satisfy its payment obligations to us when due or no longer takes part in the distribution arrangements. These changes could also decrease our opportunities in the market and decrease our negotiating strength with our wholesale partners. Furthermore, under the License Agreement, ABG Vince may remove any customer account that was pre-approved at the time of the closing of the Asset Sale if it believes using its good faith, commercially reasonable judgment, that such account is no longer consistent with the brand positioning for the Licensed Property or reject at its sole good faith discretion any new customer account we submit for its approval. If we lose any of our existing wholesale partners as a result of ABG Vince's decision to remove them, or if we are unable to expand our wholesale partnership or any addition of new wholesale partners is rejected by ABG Vince, our results of operations could be significantly and negatively impacted. These factors could have a material adverse effect on our business, financial condition, and operating results.
 
If we are unable to accurately forecast customer demand for our products, our results of operations could be materially impacted.
We stock our stores, and provide inventory to our wholesale partners, based on our or their estimates of future demand for particular products. Our inventory management and planning team determines the number of pieces of each product that we will order from our manufacturers based upon past sales of similar products, sales trend information and anticipated demand at our suggested retail prices. Our ability to accurately forecast demand for our products could be affected by many factors, including an increase or decrease in demand for our products or for products of our competitors, product introductions by competitors, unanticipated changes in general market conditions, and weakening of economic conditions or consumer confidence in future economic conditions. We cannot guarantee that we will be able to match supply with demand in all cases in the future, to produce sufficient levels of desirable product or to forecast demand accurately. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of products. Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would negatively impact our gross margin, as was the case in fiscal 2022. Conversely, if we underestimate customer demand for our products, our manufacturers may not be able to deliver products to meet our requirements, and this could harm our business. There can be no assurance that we will be able to successfully manage our inventory at a level appropriate for future customer demand.
 
General economic conditions in the U.S. and other parts of the world, including a weakening of the economy and restricted credit markets, can affect consumer confidence and consumer spending patterns.
The success of our operations depends on consumer spending. Consumer spending is impacted by a number of factors, including actual and perceived economic conditions affecting disposable consumer income, customer traffic within shopping and selling environments, business conditions, interest rates and availability of credit and tax rates in the general economy and in the international, regional and local markets in which our products are sold, including those resulting from inflation and other macroeconomic pressures in the United States and the global economy (including rising interest rates, fears of recession and continued market volatility and instability in the banking sector), health epidemics or pandemics, climate change, and catastrophic events, such as war (including the armed conflicts between Ukraine and Russia and in the Middle East) and the related governmental and non-governmental global responses to such conflict), terrorist attacks, civil unrest, and other acts of violence. A worsening of the economy may negatively affect consumer and wholesale purchases of our products and could have a material adverse effect on our business, results of operations and financial conditions.
 
We have identified a material weakness in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements.
A material weakness continued to exist relating to our internal control over financial reporting which was previously identified in fiscal 2016. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of an entity's financial statements will not be prevented or detected on a timely basis. The material weakness will not be remediated until all necessary internal controls have been implemented, tested and determined to be operating effectively. In addition, we may need to take additional measures to address such material weakness or modify the planned remediation steps, and we cannot be certain that the measures we have taken, and expect to take, to improve our internal controls will be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that the identified material weakness will not result in a material misstatement of our consolidated financial statements. Moreover, other 
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material weaknesses or deficiencies may develop or be identified in the future. If we are unable to correct material weaknesses or deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC, will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and otherwise materially and adversely impact our business and financial condition.
For so long as we remain a "non-accelerated filer" under the rules of the Securities and Exchange Commission, our independent registered public accounting firm is not required to deliver an annual attestation report on the effectiveness of our internal control over financial reporting. We will cease to be a non-accelerated filer if either (i) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter (our "public float") is $75,000 or more and our annual revenues for the most recently completed fiscal year are $100,000 or more or (ii) our public float is $700,000 or more, in which case we would become subject to the requirement for an annual attestation report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
 
Failure to comply with laws and regulations could adversely impact our business.
We are subject to numerous domestic and international laws, regulations and advisories, including labor and employment, environmental, wage and hour, customs, truth- in-advertising, consumer protection, data and privacy protection, and zoning and occupancy laws and ordinances that regulate retailers generally or govern the importation, promotion and sale of merchandise and the operation of stores and warehouse facilities. If these regulations were violated by our management, employees, vendors, independent manufacturers or partners, the costs of certain goods could increase, or we could experience delays in shipments of our products, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations. In addition we are subject to laws and regulations related to us being a public company, including the rules and regulations of the SEC and the NYSE. Any violation of or not meeting compliance standards under such laws and regulations could impact our status as a public company, including our ability to continue being listed on the NYSE. Moreover, changes in product safety or other consumer protection laws could lead to increased costs to us for certain merchandise, or additional labor costs associated with readying merchandise for sale. It is often difficult for us to plan and prepare for potential changes to applicable laws and future actions or payments related to such changes could be material to us.
 
Increased scrutiny from investors, regulators and others regarding our approach to sustainability matters and environmental, social and governance (“ESG”) practices could result in additional costs or risks that adversely impact our business operations, including our reputation and our financial results.
Increasingly, regulators, customers, investors, employees and other stakeholders are focusing on sustainability matters and ESG practices and related disclosures. The emergence of new and more stringent legislation, regulation and oversight related to sustainability and ESG practices (such as the marketing of goods and business practices, and corresponding mandatory and voluntary public reporting and disclosures related to such practices, including the SEC’s recent climate-related reporting requirements) are likely to result in increased costs and expenses and increased management time and attention spent monitoring, complying with or meeting sustainability and ESG-related requirements and expectations, which could impact our business operations, including our financial results. For example, developing and acting on sustainability and ESG-related initiatives, including design, sourcing and operations decisions, and collecting, measuring and reporting related data and metrics can be costly, difficult and time-consuming. Furthermore, the Company’s approach to sustainability matters and ESG practices may be based on assumptions and standards for measuring progress that are still evolving, internal controls and processes that are developing, and reporting standards that may be subject to change in the future.  Failure or perceived failure to adapt to or sufficiently comply with evolving or expanding regulatory requirements or stakeholder expectations and standards could further increase costs and expenses, including through potential regulatory enforcement and consumer actions, and could negatively impact the Company’s reputation, consumer patronage and, in turn, our results of operations. 
Intense competition in the apparel and fashion industry could reduce our sales and profitability.
As a fashion company, we face intense competition from other domestic and foreign apparel, footwear and accessories manufacturers and retailers. Competition has and may continue to result in pricing pressures, reduced profit margins, lost market share or failure to grow our market share, any of which could substantially harm our business and results of operations. Some of our competitors have more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, marketing, distribution and other resources than we do. These capabilities of our competitors may allow one or more of them to better withstand downturns in the economy or apparel and fashion industry. Any increased competition, or our failure to adequately address any of these competitive factors which we have seen from time to time, could result in reduced sales, which could adversely affect our business, financial condition, and operating results.
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Competition, along with such other factors as consolidation within the retail industry and changes in consumer spending patterns, could also result in significant pricing pressure and cause the sales environment to be more promotional, as it has been in recent years, impacting our financial results. For instance, we operated through a highly promotional sales environment during fiscal 2022 which had a negative impact on our operating results. If promotional pressure remains intense, either through actions of our competitors or through customer expectations, this may cause a further reduction in our sales and gross margins and could have a material adverse effect on our business, financial condition and operating results.
We may not successfully manage the transition associated with the appointment of the Interim Chief Executive Officer, and a permanent Chief Executive Officer when identified, which could have an adverse impact on us.
On March 26, 2024, Jonathan Schwefel resigned from his positions as Chief Executive Officer of the Company and member of the Board.  In connection with Mr. Schwefel’s resignation, the Board appointed David Stefko, a current member of the Board and former Chief Financial Officer of the Company, to serve as our Interim Chief Executive Officer. The Board is in the process of identifying a permanent Chief Executive Officer. 
The effectiveness of our Interim Chief Executive Officer and our senior leadership team generally, following the transition, and the transition to the permanent Chief Executive Officer when identified, could have a significant impact on our ability to operate the business effectively. The failure to ensure a smooth transition, including required knowledge transfers, could negatively affect our results of operations and financial condition as well as our ability to execute our business strategies.
If we lose any key personnel, are unable to attract key personnel, or assimilate and retain our key personnel, we may not be able to successfully operate or grow our business.
Our continued success is dependent on our ability to attract, assimilate, retain, and motivate qualified management, designers, administrative talent, and sales associates to support existing operations and future growth.  Competition for qualified talent in the apparel and fashion industry is intense, and we compete for these individuals with other companies that in many cases have greater financial and other resources. The loss of the services of any members of senior management or board of directors or the inability to attract and retain qualified executives or members of our board of directors could have a material adverse effect on our business, results of operations and financial condition. In addition, we will need to continue to attract, assimilate, retain, and motivate highly talented employees with a range of other skills and experience. Competition for employees in our industry, especially at the store management levels, is intense and we may from time to time experience difficulty in retaining our associates or attracting the additional talent necessary to support the growth of our business. We will also need to attract, assimilate, and retain other professionals across a range of disciplines, including design, production, sourcing, and international business, as we develop new product categories and continue to expand our international presence.
Our operating results may be subject to seasonal and quarterly variations in our net revenue and income from operations.
The apparel and fashion industry in which we operate is cyclical and, consequently, our revenues are affected by general economic conditions and the seasonal trends characteristic to the apparel and fashion industry. Purchases of apparel are sensitive to a number of factors that influence the level of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt, interest rates, consumer confidence as well as the impact from adverse weather conditions. In addition, fluctuations in the amount of sales in any fiscal quarter are affected by the timing of seasonal wholesale shipments and other events affecting direct-to-consumer sales; as such, the financial results for any particular quarter may not be indicative of results for the fiscal year.
Any future seasonal or quarterly fluctuations in our results of operations may not match the expectations of market analysts and investors to assess the longer- term profitability and strength of our business at any particular point, which could lead to increased volatility in our stock price. 
Our goodwill could become further impaired, which may require us to take significant non-cash charges against earnings.
In accordance with Financial Accounting Standards Board ASC Topic 350 Intangibles-Goodwill and Other ("ASC 350"), goodwill is tested for impairment at least annually and in an interim period if a triggering event occurs.  Determining the fair value of goodwill is judgmental in nature and requires the use of significant estimates and assumptions, including estimates of projected revenues, EBITDA margins, long-term growth rates, working capital and discount rates, among others. We base our estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. It is possible that our current estimates of future operating results could change adversely and impact the evaluation of the recoverability of the remaining carrying value of goodwill, the impact of which could be material. There can be no assurances that we will not be required to record further charges in our financial statements, which would negatively impact our results of operations during the period in which any impairment of our goodwill is determined.
 
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Our competitive position could suffer if the intellectual property rights relating to the Vince brand are not protected.
As a result of the Asset Sale, the intellectual property rights relating to the Vince brand will be protected and enforced by Authentic and we have no control over their actions to do so. If Authentic does not protect the intellectual property rights of the Vince brand, we may become unable to operate our business as intended, which could harm our business and cause our results of operations, liquidity, and financial condition to suffer. 
We may be unable to successfully complete the wind down of the Rebecca Taylor business.
On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group.  Substantially all Rebecca Taylor inventory was liquidated as of January 28, 2023. All Rebecca Taylor retail and outlet stores operated by the Company were closed as of January 28, 2023 and the e-commerce site operated by the Company ceased in December 2022. On July 7, 2023, Rebecca Taylor, Inc. and Rebecca Taylor Retail Stores, LLC, each as an assignor, made a General Assignment for the Benefit of the Creditors (the "Assignment") to a respective assignee, an unaffiliated California limited liability company, pursuant to California state law. The Assignment resulted in the residual rights and assets of each of Rebecca Taylor, Inc. and Rebecca Taylor Retail Stores, LLC being assigned and transferred to such assignees. As a result, Rebecca Taylor, Inc. and Rebecca Taylor Retail Stores, LLC no longer hold any assets. The execution of the wind down is subject to various remaining risks and uncertainties surrounding the actions of customers, vendors and other counterparties, including legal risks associated with the wind down. As a result, we may not be able to successfully complete the wind down of the Rebecca Taylor business or the overall cost of the wind down may exceed our expectations. Furthermore, if we are unable to successfully complete the wind down of the Rebecca Taylor business or the cost exceeds our expectations, the Vince business may be adversely impacted.
 
Risks Related to Our Information Technology and Security
 
System or data security issues, such as cyber or malware attacks, as well as other major system failures could disrupt our internal operations or information technology services, and any such disruption could negatively impact our net sales, increase our expenses and harm our reputation.
From time to time, we are subject to system or data security problems, including viruses and bugs as well as security issues created by third-party software and applications, employee errors and malfeasance and other various causes. None of these incidents has resulted in any data or information breaches or any other material impact to our financial results. There is no assurance, however, that we would not be subject to material security problems in the future, including cyber or malware attacks, including as an indirect result of the armed conflicts between Ukraine and Russia and in the Middle East, and we could incur significant expenses or disruptions of our operations in connection with resulting system failures or data and information breaches. The increased use of smartphones, tablets, and other wireless devices, as well as the hybrid and remote work environments may also heighten these and other operational risks. The costs to us to eliminate or alleviate security problems, viruses and bugs could be significant, and the efforts to address these problems could result in interruptions, delays or cessation of service that may impact our reputation and/or impede our sales, distribution or other critical functions. Furthermore, any security issues that involve the compromise of personal information of our customers or employees could subject us to litigation and/or penalties and harm our reputation, materially and adversely affecting our business and growth. We also do not control our third-party service providers and cannot guarantee that no electronic or physical computer break-ins and security breaches will occur in the future, nor can we guarantee that any loss we experience can be recovered from such third-party service providers. Lastly, in the case of a disaster affecting our information technology systems, we may experience delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support our operations and other breakdowns in normal communication and operating procedures that could materially and adversely affect our financial condition and results of operations.
We are continuing to adopt, optimize and improve our information technology systems, processes, and functions. If these systems, processes, and functions do not operate successfully, our business, financial condition, results of operations and cash flows could be materially harmed.
We continue to optimize and improve our information technology environment. For example, in fiscal 2022, we completed the implementation of a customer data platform and the front-end re-platforming of our Vince e-commerce website and in fiscal 2021, we completed the roll-out of a new POS system for the Vince brand. We plan to progress these strategies, including investing in customer facing technologies to further expand our omni-channel capabilities and to further consolidate systems over time to create operational efficiencies and to achieve a common platform across the Company. If we fail in our efforts to continue adopting, optimizing and improving these systems, processes and functions as currently planned, we could incur further disruptions to our business and operations, including lost e-commerce sales, a negative mobile experience for our customers, deficiencies or weaknesses in our internal controls, as well as additional costs to replace those systems and functions.
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Failure to comply with privacy‑related obligations, including privacy laws and regulations in the U.S. and internationally as well as other legal obligations, could materially adversely affect our business.
A variety of laws and regulations, in the U.S. and internationally, govern the collection, use, retention, sharing, transfer and security of personally identifiable information and data, including the European Union's General Data Protection Regulation ("GDPR"), which became effective during fiscal 2018, the California Consumer Privacy Act of 2018 ("CCPA"), which became effective on January 1, 2020 and the California Privacy Rights Act of 2020 ("CPRA"), which became effective January 1, 2023. Since the enactment of the CCPA and CPRA, data security laws have been proposed in more than half of the U.S. states and in the U.S. Congress, reflecting a trend toward more stringent privacy legislation in the U.S. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination, and security of data. It is possible that these laws, rules and regulations, which evolve frequently and may be inconsistent from one jurisdiction to another, could be interpreted to conflict with our practices. In addition to the costs of compliance with and other burdens imposed by privacy and data security laws and regulations, any failure or perceived failure by us or any third parties with whom we do business to comply with these laws, rules and regulations, or with other obligations to which we may be or become subject, may result in actions against us by governmental entities, private claims and litigation, fines, penalties or other liabilities. Any such action would be expensive to defend, could damage our reputation and could adversely affect our business and operating results.
 
Risks Related to Our Supply Chain
Problems with our distribution process could materially harm our ability to meet customer expectations, manage inventory, complete sale transactions, and achieve targeted operating efficiencies.
In the U.S., we rely on a distribution facility operated by a third-party logistics provider in California. Our ability to meet the needs of our wholesale partners and our own direct-to-consumer business depends on the proper operation of this distribution facility. Because substantially all of our products are distributed from one state, our operations could be interrupted by labor difficulties, or by floods, fires, earthquakes or other natural disasters and health crises and pandemics, at or near such facility. For example, a majority of our ocean shipments go through the ports in California, which had previously been subject to significant processing delays due to COVID-19 as well as a prior blockage in the Suez Canal, resulting not only in shipment disruptions but also in significantly increased freight costs. We also have warehouses overseas, including in Hong Kong and Belgium, operated by third-party logistics providers, supporting our wholesale orders for customers located primarily in the nearby regions. Disruptions at any of these facilities located outside the U.S. (including disruptions related to the armed conflict between Ukraine and Russia and in the Middle East) could also materially and negatively impact our business.
We maintain business interruption insurance. These policies, however, may not adequately protect us from the adverse effects that could result from significant disruptions to our distribution system. If we encounter problems with any of our distribution processes, our ability to meet customer expectations, manage inventory, complete sales, and achieve targeted operating efficiencies could be harmed. Any of the foregoing factors could have a material adverse effect on our business, financial condition, and operating results.
Fluctuations in the price, availability and quality of raw materials could cause delays and increase costs and cause our operating results and financial condition to suffer.
Fluctuations in the price, availability and quality of the fabrics or other raw materials, particularly cotton, silk, leather and synthetics used in our manufactured apparel, could have a material adverse effect on cost of sales or our ability to meet customer demands. The prices of fabrics depend largely on the market prices of the raw materials used to produce them. The price and availability of the raw materials and, in turn, the fabrics used in our apparel may fluctuate significantly, depending on many factors, including crop yields, weather patterns, labor costs and changes in oil prices as well as other economic factors, such as those related to the armed conflict between Ukraine and Russia and in the Middle East. We may not be able to create suitable design solutions that utilize raw materials with attractive prices or, alternatively, to pass higher raw materials prices and related transportation costs on to our customers. We are not always successful in our efforts to protect our business from the volatility of the market price of raw materials, and our business can be materially affected by dramatic movements in prices of raw materials. The ultimate effect of this change on our earnings cannot be quantified, as the effect of movements in raw materials prices on industry selling prices are uncertain, but any significant increase in these prices could have a material adverse effect on our business, financial condition and operating results.
The extent of our foreign sourcing may adversely affect our business.
In fiscal 2023 we worked with more than 25 manufacturers across 10 countries, with 79% of our products produced in China throughout fiscal 2023. A manufacturing contractor's failure to ship products to us in a timely manner or to meet the required quality standards could cause us to miss the delivery date requirements of our customers for those items. The failure to make timely deliveries 
17

 
may cause customers to cancel orders, refuse to accept deliveries or demand reduced prices, any of which could have a material adverse effect on us. As a result of the magnitude of our foreign sourcing, our business is subject to the following risks:
• political and economic instability in countries or regions, especially Asia and in connection with armed conflict (such as conflicts between Ukraine and Russia and in the Middle East), including heightened terrorism, diplomatic and other security concerns, which could subject imported or exported goods to additional or more frequent inspections, leading to delays in deliveries or impoundment of goods;
• imposition of regulations, quotas and other trade restrictions relating to imports, including the additional tariffs and bans imposed on certain imports from China (such as those imposed by the Uyghur Forced Labor Prevention Act), as well as other quotas imposed by bilateral textile agreements between the U.S. and foreign countries from time to time;
• currency exchange rates;
• imposition of increased duties, taxes, tariffs and other charges on imports;
• increases in the costs of fuel, travel and transportation, both related and unrelated to the armed conflict between Ukraine and Russia and in the Middle East, and demand for freight services at a time of reduced ocean freight capacity;
• disease epidemics and health-related concerns, which could result in travel restrictions, closed factories, reduced workforces and higher labor costs, scarcity of and increased prices for raw materials and scrutiny or embargoing of goods produced in infected areas;
• labor union strikes at ports through which our products enter the U.S.;
• labor shortages in countries where contractors and suppliers are located;
• restrictions on the transfer of funds to or from foreign countries;
• the migration and development of manufacturing contractors, which could affect where our products are or are planned to be produced;
• reduced manufacturing flexibility because of geographic distance between our foreign manufacturers and us, increasing the risk that we may have to mark down unsold inventory as a result of misjudging the market for a foreign-made product; and
• violations by foreign contractors of labor and wage standards and resulting adverse publicity.
If these risks limit or prevent us from manufacturing products in any significant international market, prevent us from acquiring products from foreign suppliers, or significantly increase the cost of our products, our operations could be seriously disrupted until alternative suppliers are found or alternative markets are developed, which could negatively and significantly impact our business. While we may be able to shift our sourcing options to avoid any negative macroenvironmental impact of a particular region such as China, executing such a shift would be time consuming and would be difficult or impracticable for many products and may result in an increase in our manufacturing costs and/or may negatively impact the quality of our products. Any increase in the prices of our products and/or decline in the quality of our products could in turn negatively impact the demand for our products. 
Our reliance on independent manufacturers could cause delays or quality issues which could damage customer relationships.
We use independent manufacturers to assemble or produce all of our products, whether inside or outside the U.S. We are dependent on the ability of these independent manufacturers to adequately finance the production of goods ordered and maintain sufficient manufacturing capacity. Because we do not control these independent manufacturers, they may not continue to provide products that are consistent with our standards. We receive from time to time shipments of product that fail to conform to our quality control standards or products that are damaged during shipment as they were not properly packed. Failures such as these in our quality control program may result in diminished product quality, which in turn may result in increased order cancellations and returns, decreased consumer demand for our products, or product recalls, any of which may have a material adverse effect on our results of operations and financial condition. In addition, products that fail to meet our standards, or other unauthorized products, could end up in the marketplace without our knowledge. This could materially harm our brand and our reputation in the marketplace. 
We generally do not have long-term written agreements with any independent manufacturers. As a result, any single manufacturing contractor could unilaterally terminate its relationship with us at any time or attempt to change historical terms of engagement, such as demanding accelerated payment terms, all and any of such actions by a manufacturing contractor could disrupt our supply chain strategies and our operations. Our top five manufacturers accounted for the production of approximately 54% of our finished products during fiscal 2023. Supply disruptions from these manufacturers (or any of our other manufacturers) could have a material adverse effect on our ability to meet customer demands if we are unable to source suitable replacement materials at acceptable prices or at all. Moreover, alternative manufacturers, if available, may not be able to provide us with products or services of a comparable quality, at an acceptable price or on a timely basis. We may also, from time to time, make a decision to enter into a relationship with a new manufacturer. Identifying a suitable supplier is an involved process that requires us to become satisfied with 
18

 
their quality control, responsiveness and service, financial stability and labor and other responsible and/or ethical business practices. There can be no assurance that there will not be a disruption in the supply of our products from independent manufacturers or that any new manufacturer will be successful in producing our products in a manner we expected. 
If our independent manufacturers fail to use ethical business practices and comply with applicable laws and regulations, our business could be harmed due to negative publicity.
We have established operating guidelines which promote responsible and ethical business practices such as fair wage practices, compliance with child labor laws and other local laws. While we monitor compliance with those guidelines, we do not control our independent manufacturers or their business practices. Accordingly, we cannot guarantee their compliance with our guidelines. From time to time, our audit results have revealed a lack of compliance in certain respects, including with respect to local labor, safety, and environmental laws. Other fashion companies have faced criticism after highly publicized incidents or compliance issues have occurred or been exposed at factories producing their products. To the extent our manufacturers do not bring their operations into compliance with such laws or resolve material issues identified in any of our audit results, we may face similar criticism and negative publicity. In addition, other fashion companies have encountered organized boycotts of their products in such situations. If we, or other companies in our industry, encounter similar problems in the future, it could harm our business, stock price and results of operations. In addition, a lack of demonstrated compliance by our suppliers could lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations. Furthermore, expectations of ethical business practices continually evolve, may be substantially more demanding than applicable legal requirements and are driven in part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived ethical shortcomings. Accordingly, we cannot predict how expectations of ethical business practices might develop in the future and cannot be certain that our guidelines would satisfy all parties who are active in monitoring and publicizing perceived shortcomings in labor and other business practices worldwide.
 
Risks Related to Our Structure and Ownership
We are a "controlled company," controlled by investment funds advised by affiliates of Sun Capital, whose interests in our business may be different from yours.
Affiliates of Sun Capital owned approximately 68% of our outstanding common stock as of March 31, 2024. As such, affiliates of Sun Capital will, for the foreseeable future, have significant influence over our reporting and corporate management and affairs, and will be able to control virtually all matters requiring stockholder approval. For so long as affiliates of Sun Capital own 30% or more of our outstanding shares of common stock, Sun Cardinal, LLC, an affiliate of Sun Capital, will have the right to designate a majority of our board of directors.
Affiliates of Sun Capital control actions to be taken by us, our board of directors and our stockholders, including amendments to our amended and restated certificate of incorporation and amended and restated bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. The directors designated by affiliates of Sun Capital have the authority, subject to the terms of our indebtedness and the rules and regulations of the New York Stock Exchange (the "NYSE"), to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. Our amended and restated certificate of incorporation provides that the doctrine of "corporate opportunity" does not apply to Sun Capital or its affiliates, or any of our directors who are associates of, or affiliated with, Sun Capital, in a manner that would prohibit them from investing in competing businesses or doing business with our partners or customers. It is possible that the interests of Sun Capital and its affiliates may in some circumstances conflict with our interests and the interests of our other stockholders, including you. For example, Sun Capital may have different tax positions from other stockholders, which could influence their decisions regarding whether and when we should dispose of assets and whether and when we should incur new or refinance existing indebtedness. 
We are a "smaller reporting company" and intend to avail ourselves of reduced disclosure requirements applicable to smaller reporting companies, which could make our common stock less attractive to investors.
We are a "smaller reporting company," as defined in the Exchange Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "smaller reporting companies," including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We intend to take advantage of these reporting exemptions until we are no longer a "smaller reporting company." We will remain a "smaller reporting company" until the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $250,000 or more and annual revenue as of our most recently completed fiscal year is $100,000 or more, or the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $700,000 or more, regardless of annual revenue.
19

 
 
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Cybersecurity Risk Management and Strategy
The Company is committed to, and recognizes the importance of, information security, cyber readiness, and data privacy protections to our business and reputation, which includes assessing, identifying, and managing material risks associated with cybersecurity threats.  Our cybersecurity program uses processes, technologies, and controls to assist in our efforts to assess, identify, and manage material cybersecurity-related risks. 
The Company employs a number of tools and services, such as network monitoring and vulnerability assessments to inform our risk identification and assessment processes.  We also maintain an incident response plan that outlines processes designed to triage, assess the severity of, escalate, contain, investigate, and remediate cybersecurity incidents while also complying with relevant legal obligations. Our employees receive cybersecurity awareness and sensitive information protection training on a regular basis, which we also periodically test for effectiveness through simulations, which may include simulated phishing emails and tabletop exercises.  Additionally, the Company regularly makes assessments related to the potential impact of a security incident at a third-party vendor, service provider or customer or otherwise implicating the third-party technology and systems the Company uses.  We also maintain cybersecurity risk insurance.
Our information security team serves as a first line of defense, including managing cyber risk strategy execution and owning the day-to-day management of these risks. Our enterprise risk management function, which includes members of our executive leadership team, serves as a second line of defense, bringing holistic risk oversight while serving as a partner to the business to help strategically manage risk. In particular, cybersecurity risks are monitored by a team composed of members of our executive team, who in turn provides updates to the Audit Committee of our Board of Directors, who is responsible for assisting the Board of Directors with oversight over cybersecurity risks. 
Through the processes described above, we did not identify risks from current or past cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents. See Part I, Item IA. Risk Factors – “Risks Related to Our Information Technology and Security”.
Cybersecurity Governance
Our Board of Directors and Audit Committee are actively engaged in the oversight of our information security program, including the Company’s technology and information security policies and practices, the internal controls relating to information security, and the steps taken by management to identify, monitor, and control any risk exposures. Our management has general responsibility for day-to-day implementation of our information technology, cybersecurity, and privacy strategies and policies, including deployment and use of security tools, applications, and employee training. Role or project specific employee training, as well as other training, may also occur, as needed. Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our Chief Information Officer (“CIO”), who is assisted by other members of our senior management team.  The team engaged in the cybersecurity risk management process, including the CIO, has risk management backgrounds, certifications, and/or cyber experience in prior professional roles and at the Company.  The team also maintains expertise on cyber risk management through third party consultants, external training, and affiliations with relevant organizations.
Given the importance of information security to our customers, employees, suppliers and other partners, our Board and/or the Audit Committee receives reports as needed from our CIO on cybersecurity-related matters, including the status of projects to strengthen our security systems and to improve our cyber threat readiness, as well as on the existing and emerging cyber threat landscape and our program for managing these security risks.
20

 
ITEM 2. PROPERTIES.
The following table sets forth the location, use and size of our significant corporate facilities and showrooms as of February 3, 2024, all of which are leased under various agreements expiring at various times through fiscal 2034, subject to renewal options.
 











Location
 
Use
 
Approximate Square Footage
 


New York, NY
 
Corporate Office
 
 
49,492
 


Los Angeles, CA
 
Vince Design Studio
 
 
28,541
 


Paris, France
 
Vince Showroom
 
 
4,209
 


As of February 3, 2024, we leased 150,407 gross square feet related to our 63 company-operated Vince retail stores. Although our more recent leases are subject to shorter terms as a result of the implementation of our strategy to pursue shorter lease terms, some of our leases have initial terms of 10 years, and in some instances, can be extended for an additional term. Substantially all of our leases require a fixed annual rent, and most require the payment of additional rent if store sales exceed a negotiated amount. Most of our leases are "net" leases, which require us to pay all of the cost of insurance, taxes, maintenance, and utilities. Although we generally cannot cancel these leases at our option, certain of our leases allow us, and in some cases, the lessor, to terminate the lease if we do not achieve a specified gross sales threshold. 
The following store list shows the location, opening date, type, and size of our company-operated retail locations as of February 3, 2024: 
 
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Vince Locations
 
State
 
Opening Date
 
Type
 
Gross Square Feet
 
 
Selling Square Feet
 


Washington St. (New York)
 
NY
 
February 3, 2009
 
Street
 
 
1,850
 
 
 
1,150
 


Prince St. (Nolita - New York)
 
NY
 
July 25, 2009
 
Street
 
 
2,002
 
 
 
1,356
 


Geary Street (San Francisco)
 
CA
 
October 15, 2009
 
Street
 
 
1,895
 
 
 
1,408
 


East Oak Street (Chicago)
 
IL
 
October 1, 2010
 
Street
 
 
2,590
 
 
 
1,371
 


Madison Ave. (New York)
 
NY
 
August 3, 2012
 
Street
 
 
3,503
 
 
 
1,928
 


Westport (Westport)
 
CT
 
March 28, 2013
 
Street
 
 
1,801
 
 
 
1,344
 


Greenwich (Greenwich)
 
CT
 
July 19, 2013
 
Street
 
 
2,463
 
 
 
1,724
 


Mercer St. (Soho - New York)
 
NY
 
August 22, 2013
 
Street
 
 
4,500
 
 
 
3,080
 


Columbus Ave. (Upper West Side - New York)
 
NY
 
December 18, 2013
 
Street
 
 
4,465
 
 
 
3,126
 


Newbury St. (Boston)
 
MA
 
May 24, 2014
 
Street
 
 
4,124
 
 
 
3,100
 


Walnut St. (Philadelphia)
 
PA
 
August 4, 2014
 
Street
 
 
3,250
 
 
 
2,000
 


Abbot Kinney (Los Angeles)
 
CA
 
September 26, 2015
 
Street
 
 
1,990
 
 
 
1,815
 


Melrose (West Hollywood)
 
CA
 
October 15, 2017
 
Street
 
 
1,932
 
 
 
1,554
 


Draycott (London, United Kingdom)
 
 
 
September 18, 2019
 
Street
 
 
1,582
 
 
 
1,087
 


Fifth Ave. (New York)
 
NY
 
September 20, 2019
 
Street
 
 
2,820
 
 
 
1,948
 


East Hampton (East Hampton)
 
NY
 
February 6, 2021
 
Street
 
 
1,830
 
 
 
1,290
 


Knox Street (Dallas)
 
TX
 
September 17, 2021
 
Street
 
 
1,802
 
 
 
1,280
 


Total Street (17)
 
 
 
 
 
 
 
 
44,399
 
 
 
30,561
 


Malibu County Mart (Malibu)
 
CA
 
August 9, 2009
 
Lifestyle Center
 
 
1,298
 
 
 
1,070
 


Town Center at Boca Raton (Boca Raton)
 
FL
 
October 13, 2009
 
Mall
 
 
1,206
 
 
 
1,013
 


The Westchester (White Plains)
 
NY
 
November 6, 2009
 
Mall
 
 
2,486
 
 
 
1,775
 


Phipps Plaza (Atlanta)
 
GA
 
April 16, 2010
 
Mall
 
 
1,643
 
 
 
1,356
 


Stanford Shopping Center (Palo Alto)
 
CA
 
September 17, 2010
 
Lifestyle Center
 
 
2,028
 
 
 
1,391
 


Fashion Island (Newport Beach)
 
CA
 
May 20, 2011
 
Lifestyle Center
 
 
2,317
 
 
 
1,642
 


Chestnut Hill (Chestnut Hill)
 
MA
 
July 25, 2014
 
Lifestyle Center
 
 
2,357
 
 
 
1,886
 


Merrick Park (Coral Gables)
 
FL
 
April 30, 2015
 
Lifestyle Center
 
 
2,022
 
 
 
1,482
 


DC City Center (Washington)
 
DC
 
April 30, 2015
 
Lifestyle Center
 
 
3,202
 
 
 
2,562
 


Scottsdale Quarter (Scottsdale)
 
AZ
 
May 15, 2015
 
Lifestyle Center
 
 
2,753
 
 
 
2,200
 


River Oaks (Houston)
 
TX
 
October 1, 2015
 
Lifestyle Center
 
 
2,998
 
 
 
2,398
 


Tyson's Galleria (McLean)
 
VA
 
April 29, 2016
 
Mall
 
 
2,668
 
 
 
1,705
 


The Grove (Los Angeles)
 
CA
 
May 23, 2016
 
Lifestyle Center
 
 
2,717
 
 
 
2,174
 


Somerset Collection (Troy)
 
MI
 
May 27, 2016
 
Mall
 
 
2,000
 
 
 
1,533
 


King of Prussia (King of Prussia)
 
PA
 
August 18, 2016
 
Mall
 
 
3,107
 
 
 
2,202
 


Fashion Valley (San Diego)*
 
CA
 
August 25, 2016
 
Lifestyle Center
 
 
1,606
 
 
 
1,300
 


Hawaii (Honolulu)
 
HI
 
May 25, 2017
 
Mall
 
 
1,828
 
 
 
1,371
 


Short Hills (Short Hills)
 
NJ
 
March 29, 2018
 
Mall
 
 
1,450
 
 
 
1,290
 


El Paseo Village (Palm Desert)
 
CA
 
April 26, 2018
 
Lifestyle Center
 
 
2,615
 
 
 
2,002
 


Waterside Shops (Naples)
 
FL
 
May 24, 2018
 
Mall
 
 
1,723
 
 
 
1,315
 


The Domain (Austin)
 
TX
 
June 28, 2018
 
Mall
 
 
1,719
 
 
 
1,375
 


Palisades Village (Pacific Palisades)
 
CA
 
October 4, 2018
 
Lifestyle Center
 
 
2,953
 
 
 
2,525
 


The Gardens Mall (Palm Beach Gardens)
 
FL
 
October 19, 2018
 
Mall
 
 
2,360
 
 
 
2,025
 


Aventura Mall (Aventura)
 
FL
 
April 5, 2019
 
Mall
 
 
1,873
 
 
 
1,280
 


Santana Row (San Jose)
 
CA
 
August 8, 2019
 
Lifestyle Center
 
 
2,295
 
 
 
1,517
 


The Shops at Riverside (Hackensack)
 
NJ
 
February 27, 2020
 
Mall
 
 
2,843
 
 
 
2,296
 


Southpark (Charlotte)
 
NC
 
May 21, 2021
 
Mall
 
 
1,630
 
 
 
1,040
 


Roosevelt Field (Garden City)
 
NY
 
August 6, 2021
 
Mall
 
 
1,678
 
 
 
1,214
 


Cherry Creek (Denver)
 
CO
 
August 20, 2021
 
Lifestyle Center
 
 
2,032
 
 
 
1,512
 


Pentagon City (Arlington)
 
VA
 
September 3, 2021
 
Mall
 
 
1,937
 
 
 
1,359
 


Boston Seaport (Boston)
 
MA
 
May 13, 2022
 
Lifestyle Center
 
 
1,820
 
 
 
1,386
 


Total Mall and Lifestyle Centers (31)
 
 
 
 
 
 
 
 
67,164
 
 
 
51,196
 


Total Full-Price (48)
 
 
 
 
 
 
 
 
111,563
 
 
 
81,757
 


Cabazon Premium (Cabazon)
 
CA
 
November 11, 2011
 
Outlet
 
 
3,250
 
 
 
2,000
 


Riverhead (Riverhead)
 
NY
 
November 30, 2012
 
Outlet
 
 
2,500
 
 
 
2,000
 


Fashion Outlets of Chicago (Rosemont)
 
IL
 
August 1, 2013
 
Outlet
 
 
3,485
 
 
 
2,599
 


Seattle Premium (Tulalip)
 
WA
 
August 30, 2013
 
Outlet
 
 
2,214
 
 
 
1,550
 


Las Vegas (Las Vegas)
 
NV
 
October 3, 2013
 
Outlet
 
 
2,028
 
 
 
1,420
 


San Marcos (San Marcos)
 
TX
 
October 10, 2014
 
Outlet
 
 
2,433
 
 
 
1,703
 


Carlsbad Premium (Carlsbad)
 
CA
 
October 24, 2014
 
Outlet
 
 
2,453
 
 
 
1,717
 


Wrentham Village Premium (Wrentham)
 
MA
 
September 29, 2014
 
Outlet
 
 
2,000
 
 
 
1,400
 


Camarillo Premium (Camarillo)
 
CA
 
February 1, 2015
 
Outlet
 
 
3,001
 
 
 
2,101
 


San Francisco Premium (Livermore)
 
CA
 
August 13, 2015
 
Outlet
 
 
2,485
 
 
 
1,753
 


Chicago Premium (Aurora)
 
IL
 
August 27, 2015
 
Outlet
 
 
2,300
 
 
 
1,840
 


Woodbury Commons (Central Valley)
 
NY
 
November 6, 2015
 
Outlet
 
 
2,289
 
 
 
1,831
 


Sawgrass Mills (Sunrise)
 
FL
 
December 4, 2015
 
Outlet
 
 
2,866
 
 
 
2,326
 


22

 



















Orlando Vineland Premium (Orlando)
 
FL
 
November 24, 2020
 
Outlet
 
 
2,914
 
 
 
2,302
 


Leesburg (Leesburg)
 
VA
 
June 11, 2021
 
Outlet
 
 
2,626
 
 
 
2,042
 


Total Outlets (15)
 
 
 
 
 
 
 
 
38,844
 
 
 
28,584
 


Total Vince Stores (63)
 
 
 
 
 
 
 
 
150,407
 
 
 
110,341
 


 
*As of February 3, 2024, this location is in the process of relocating to another store within the same Lifestyle Center. 
ITEM 3. LEGAL PROCEEDINGS.
We are a party to legal proceedings, compliance matters, environmental, as well as wage and hour and other labor claims that arise in the ordinary course of our business. Although the outcome of such items cannot be determined with certainty, we believe that the ultimate outcome of these items, individually and in the aggregate, will not have a material adverse impact on our financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock trades on the New York Stock Exchange under the symbol "VNCE". 
Record Holders
As of March 29, 2024, there were 3 holders of record of our common stock.
Dividends
We have never paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business, and we do not anticipate paying any cash dividends in the foreseeable future. In addition, because we are a holding company, our ability to pay dividends depends on our receipt of cash distributions from our subsidiaries. The terms of our indebtedness substantially restrict the ability to pay dividends. See "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Financing Activities" of this Annual Report for a description of the related restrictions.
Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current and future financing instruments and other factors that our board of directors deems relevant.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not repurchase any shares of common stock during the three months ended February 3, 2024.
Unregistered Sales of Equity Securities
None. 
23

 
ITEM 6. [RESERVED] 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our fiscal year ends on the Saturday closest to January 31. Fiscal years 2023 and 2022 ended on February 3, 2024 ("fiscal 2023") and January 28, 2023 ("fiscal 2022"), respectively. Fiscal 2023 consisted of 53 weeks and fiscal 2022 consisted of 52 weeks. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. All amounts disclosed are in thousands except store counts, share and per share data and percentages. 
This discussion contains forward-looking statements involving risks, uncertainties and assumptions that could cause our results to differ materially from expectations. For a discussion of the risks facing our business, see "Part I, Item 1A—Risk Factors" included in this Annual Report.
Executive Overview
We are a global retail company that operates the Vince brand women's and men's ready to wear business. We serve our customers through a variety of channels that reinforces the brand image. Previously, we also owned and operated the Rebecca Taylor and Parker brands until the sale of the respective intellectual property was completed, as discussed below. 
Vince, established in 2002, is a leading global luxury apparel and accessories brand best known for creating elevated yet understated pieces for every day effortless style. As of February 3, 2024, we operate 48 full-price retail stores, 15 outlet stores, the e-commerce site, vince.com, and the subscription service Vince Unfold, vinceunfold.com.  Vince is also available through premium wholesale channels globally.
On April 21, 2023 the Company entered into a strategic partnership ("Authentic Transaction") with Authentic Brands Group, LLC ("Authentic"), a global brand development, marketing and entertainment platform, whereby the Company will contribute its intellectual property to a newly formed Authentic subsidiary ("ABG Vince") for cash consideration and a membership interest in ABG Vince. The Company closed the Asset Sale on May 25, 2023. On May 25, 2023, in connection with the Authentic Transaction, Vince, LLC, entered into a License Agreement (the "License Agreement") with ABG Vince, which provides Vince, LLC with an exclusive, long-term license to use the Licensed Property in the Territory to the Approved Accounts (each as defined in the License Agreement). See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information. 
Rebecca Taylor, founded in 1996 in New York City, was a contemporary womenswear line lauded for its signature prints, romantic detailing and vintage inspired aesthetic, reimagined for a modern era. On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information. The Rebecca Taylor collection was previously available through retail stores and outlet stores, through its branded e-commerce site and through its subscription service Rebecca Taylor RNTD, as well as through major department and specialty stores in the U.S. and in select international markets. All Rebecca Taylor retail and outlet stores operated by the Company were closed as of January 28, 2023 and the ecommerce site operated by the Company ceased in December 2022. 
Parker, founded in 2008 in New York City, was a contemporary women's fashion brand that was trend focused. During the first half of fiscal 2020 the Company decided to pause the creation of new products to focus resources on the operations of the Vince and Rebecca Taylor brands. On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for further information. The Parker collection was previously available through major department stores and specialty stores worldwide as well as through its e-commerce website. 
The Company has identified three reportable segments: Vince Wholesale, Vince Direct-to-consumer and Rebecca Taylor and Parker. 
Transformation Program 
The Company is implementing a transformation program focused on driving enhanced profitability through an improved gross margin profile and optimized expense structure, beginning fiscal 2024.  The transformation program is focused on improving the Company’s gross margin profile and driving cost efficiencies.  The Company expects to achieve these goals primarily through streamlining manufacturing and production operations, reducing promotional activity and optimizing the breadth and depth of markdowns, and enhancing efficiencies within store operations, corporate overhead and third-party spend. 
24

 
Results of Operations
Comparable Sales
Comparable sales include our e-commerce sales in order to align with how we manage our brick-and-mortar retail stores and e-commerce online stores as a combined single direct-to-consumer channel of distribution. As a result of our omni-channel sales and inventory strategy, as well as cross-channel customer shopping patterns, there is less distinction between our brick-and-mortar retail stores and our e-commerce online stores and we believe the inclusion of e-commerce sales in our comparable sales metric is a more meaningful representation of these results and provides a more comprehensive view of our year over year comparable sales metric.
A store is included in the comparable sales calculation after it has completed 13 full fiscal months of operations and includes stores, if any, that have been remodeled or relocated within the same geographic market the Company served prior to the relocation. Non-comparable sales include new stores which have not completed 13 full fiscal months of operations, sales from closed stores, and relocated stores serving a new geographic market. For 53-week fiscal years, we continue to adjust comparable sales to exclude the additional week. There may be variations in the way in which some of our competitors and other retailers calculate comparable sales.
Fiscal 2023 Compared to Fiscal 2022
The following table presents, for the periods indicated, our operating results as a percentage of net sales as well as earnings (loss) per share data:
 





























 
 
Fiscal Year
 
 
 
 
 
 
 


 
 
2023
 
 
2022
 
 
Variances
 


 
 
 
 
 
% of Net
 
 
 
 
 
% of Net
 
 
 
 
 
 
 


(in thousands, except per share data and percentages)
 
Amount
 
 
Sales
 
 
Amount
 
 
Sales
 
 
Amount
 
 
Percent
 


Statements of Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Net sales
 
$
292,890
 
 
 
100.0
%
 
$
357,442
 
 
 
100.0
%
 
$
(64,552
)
 
 
(18.1
)%


Cost of products sold
 
 
159,598
 
 
 
54.5
%
 
 
219,472
 
 
 
61.4
%
 
 
(59,874
)
 
 
(27.3
)%


Gross profit
 
 
133,292
 
 
 
45.5
%
 
 
137,970
 
 
 
38.6
%
 
 
(4,678
)
 
 
(3.4
)%


Impairment of intangible assets
 
 
—
 
 
 
0.0
%
 
 
1,700
 
 
 
0.5
%
 
 
(1,700
)
 
*
 


Impairment of long-lived assets
 
 
—
 
 
 
0.0
%
 
 
1,880
 
 
 
0.5
%
 
 
(1,880
)
 
*
 


Gain on sale of intangible assets
 
 
(32,808
)
 
 
(11.2
)%
 
 
(1,620
)
 
 
(0.5
)%
 
 
(31,188
)
 
*
 


Selling, general and administrative expenses
 
 
134,476
 
 
 
45.9
%
 
 
161,432
 
 
 
45.2
%
 
 
(26,956
)
 
 
(16.7
)%


Income (loss) from operations
 
 
31,624
 
 
 
10.8
%
 
 
(25,422
)
 
 
(7.1
)%
 
 
57,046
 
 
 
(224.4
)%


Interest expense, net
 
 
11,118
 
 
 
3.8
%
 
 
9,887
 
 
 
2.8
%
 
 
1,231
 
 
 
12.5
%


Income (loss) before income taxes and equity in net income of equity method investment
 
 
20,506
 
 
 
7.0
%
 
 
(35,309
)
 
 
(9.9
)%
 
 
55,815
 
 
 
(158.1
)%


(Benefit) provision for income taxes
 
 
(3,478
)
 
 
(1.2
)%
 
 
3,037
 
 
 
0.8
%
 
 
(6,515
)
 
 
(214.5
)%


Income (loss) before equity in net income of equity method investment
 
 
23,984
 
 
 
8.2
%
 
 
(38,346
)
 
 
(10.7
)%
 
 
62,330
 
 
 
(162.5
)%


Equity in net income of equity method investment
 
 
1,462
 
 
 
0.5
%
 
 
—
 
 
 
0.0
%
 
 
1,462
 
 
 *
 


Net income (loss)
 
$
25,446
 
 
 
8.7
%
 
$
(38,346
)
 
 
(10.7
)%
 
$
63,792
 
 
 
(166.4
)%


Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Basic earnings (loss) per share
 
$
2.05
 
 
 
 
 
$
(3.14
)
 
 
 
 
 
 
 
 
 


Diluted earnings (loss) per share
 
$
2.04
 
 
 
 
 
$
(3.14
)
 
 
 
 
 
 
 
 
 


 
(*) Not meaningful
Net sales for fiscal 2023 were $292,890, decreasing $64,552, or 18.1%, versus $357,442 for fiscal 2022. The reduction was primarily due to the wind down of Rebecca Taylor and higher off-price sales in the fourth quarter of fiscal 2022, partly offset by the effect of the 53rd week.
Gross profit decreased $4,678, or 3.4%, to $133,292 in fiscal 2023 from $137,970 in fiscal 2022. As a percentage of sales, gross margin was 45.5%, compared with 38.6% in the prior year. The total gross margin rate increase was primarily driven by the following factors:
•The favorable impact from the wind down of the Rebecca Taylor business, which historically operated at a lower overall gross margin, contributed positively by approximately 310 basis points;
25

 
•The favorable impact from lower product costing, freight costs, and higher pricing which contributed positively by approximately 250 basis points;
•The favorable impact of year-over-year adjustments to inventory reserves contributed positively by approximately 200 basis points; and
•The favorable impact from lower promotional activity in the Direct-to-consumer segment which contributed approximately 140 basis points; partly offset by
•The unfavorable impact from royalty expense associated with the License Agreement with ABG Vince contributed negatively by approximately 320 basis points.
Impairment of intangible assets for fiscal 2022 was $1,700 related to the impairment of the Rebecca Taylor tradename. See Note 3 "Goodwill and Intangible Assets" to the Consolidated Financial Statements in this Annual Report for further information. 
Impairment of long-lived assets for fiscal 2022 was $1,880 related to the impairment of property and equipment for certain Vince and Rebecca Taylor retail locations. See Note 1 "Description of Business and Summary of Significant Accounting Policies".
Gain on sale of intangible assets for fiscal 2023 was $32,808, of which $32,043 is related to the sale of the Vince intellectual property and certain related ancillary assets and $765 is related to the sale of the Parker intellectual property and certain ancillary assets.  For fiscal 2022, there was a gain on sale of intangible assets of $1,620 related to the sale of the Rebecca Taylor intellectual property and certain related ancillary assets. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information.
Selling, general and administrative ("SG&A") expenses for fiscal 2023 were $134,476, decreasing $26,956, or 16.7%, versus $161,432 for fiscal 2022. SG&A expenses as a percentage of sales were 45.9% and 45.2% for fiscal 2023 and fiscal 2022, respectively. The change in SG&A expenses compared to the prior year period was primarily due to:
•$26,822 net decrease in total SG&A expenses resulting from the wind down of the Rebecca Taylor brand;
•$2,218 of decreased compensation and benefits, primarily due to lower incentive-based compensation, partly offset by $946 attributable to the 53rd week; 
•$1,729 of decreased samples expense resulting from improved production efficiencies; and
•$1,099 of decreased marketing and advertising costs; partly offset by 
•$5,030 of transaction related expenses associated with the Asset Sale; and
•$1,205 of increased rent expense primarily due to lease modifications effective in late fiscal 2022.
Interest expense, net increased $1,231, or 12.5%, to $11,118 in fiscal 2023 from $9,887 in fiscal 2022 primarily due to $1,755 write-off of deferred financing costs and a $553 prepayment penalty both associated with the termination of the Term Loan Credit Facility (as defined below), as well as an $828 write-off of deferred financing costs associated with the termination of the 2018 Revolving Credit Facility (as defined below).   This increase in interest expense was partly offset by an overall reduction of debt primarily through the termination of the term loan credit facility in the second quarter of fiscal 2023.
Provision for income taxes for fiscal 2023 was a benefit of $3,478 as compared to an expense of $3,037 for fiscal 2022. Our effective tax rate for fiscal 2023 and fiscal 2022 was (17.0)% and (8.6)%, respectively. The effective tax rate for fiscal 2023 differed from the U.S. statutory rate of 21% primarily due to the tax impacts associated with the Authentic Transaction, offset by state and foreign taxes and tax expense related to a portion of the non-cash deferred tax liability related to the Company’s equity method investment, which cannot be used as a source of income to support the realization of certain deferred tax assets related to the Company’s net operating losses. 
The effective tax rate for fiscal 2022 differed from the U.S. statutory rate of 21% primarily due to the increase in deferred tax liabilities attributable to indefinite-lived goodwill and intangible assets, as well as state and foreign taxes partially offset by the impact of valuation allowance established against additional deferred tax assets.  See Note 11 "Income Taxes" to the Consolidated Financial Statements in this Annual Report for further information. 
Equity in net income of equity method investment of $1,462 consists of the Company's proportionate share of ABG Vince's net income for fiscal 2023.  See Note 2 "Recent Transactions" for further information.
 
Performance by Segment
The Company has identified three reportable segments as further described below: 
26

 
•Vince Wholesale segment—consists of the Company's operations to distribute Vince brand products to major department stores and specialty stores in the United States and select international markets; 
•Vince Direct-to-consumer segment—consists of the Company's operations to distribute Vince brand products directly to the consumer through its Vince branded full-price specialty retail stores, outlet stores, and e-commerce platform, and its subscription service Vince Unfold; and
•Rebecca Taylor and Parker segment—consisted of the Company's operations to distribute Rebecca Taylor and Parker brand products to major department stores and specialty stores in the U.S. and select international markets, directly to the consumer through their own branded e-commerce platforms and Rebecca Taylor retail and outlet stores, and through its subscription service Rebecca Taylor RNTD. 
On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for further information. Substantially all Rebecca Taylor inventory was liquidated as of January 28, 2023. Additionally, all Rebecca Taylor retail and outlet stores operated by the Company were closed as of January 28, 2023 and the e-commerce site operated by the Company ceased in December 2022.
On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information.
Unallocated corporate expenses are related to the Vince brand and are comprised of SG&A expenses attributable to corporate and administrative activities (such as marketing, design, finance, information technology, legal and human resource departments), and other charges that are not directly attributable to the Company's Vince Wholesale and Vince Direct-to-consumer reportable segments. 
 













 
 
Twelve Months Ended
 


 
 
February 3,
 
 
January 28,
 


(in thousands)
 
2023
 
 
2022
 


Net Sales:
 
 
 
 
 
 


Vince Wholesale
 
$
149,603
 
 
$
169,375
 


Vince Direct-to-consumer
 
 
143,096
 
 
 
149,770
 


Rebecca Taylor and Parker
 
 
191
 
 
 
38,297
 


Total net sales
 
$
292,890
 
 
$
357,442
 


 
 
 
 
 
 
 


Income (loss) from operations:
 
 
 
 
 
 


Vince Wholesale
 
$
43,416
 
 
$
43,592
 


Vince Direct-to-consumer
 
 
5,774
 
 
 
2,397
 


Rebecca Taylor and Parker
 
 
2,443
 
 
 
(21,255
)


Subtotal
 
 
51,633
 
 
 
24,734
 


Unallocated corporate (1)
 
 
(20,009
)
 
 
(50,156
)


Total income (loss) from operations
 
$
31,624
 
 
$
(25,422
)


 
(1) Unallocated corporate for fiscal 2023 includes the $32,043 gain related to the sale of the Vince intellectual property and certain related ancillary assets.
 
 
Vince Wholesale
 

















 
 
Twelve Months Ended
 


(in thousands)
 
February 3, 2024
 
 
January 28, 2023
 
 
$ Change
 


Net sales
 
$
149,603
 
 
$
169,375
 
 
$
(19,772
)


Income from operations
 
 
43,416
 
 
 
43,592
 
 
 
(176
)


Net sales from our Vince Wholesale segment decreased $19,772, or 11.7%, to $149,603 in fiscal 2023 from $169,375 in fiscal 2022, due primarily to lower off-price and international shipments, in addition to the reduction of licensing revenue due to the sale and transfer of our intellectual property assets under the Asset Sale.
Income from operations from our Vince Wholesale segment decreased $176, or 0.4%, to $43,416 in fiscal 2023 from $43,592 in fiscal 2022 primarily due to lower net sales that were partially offset by an improved gross margin, which was unfavorably impacted by royalty expenses associated with the License Agreement with ABG Vince.
27

 
Vince Direct-to-consumer
 

















 
 
Twelve Months Ended
 


(in thousands)
 
February 3, 2024
 
 
January 28, 2023
 
 
$ Change
 


Net sales
 
$
143,096
 
 
$
149,770
 
 
$
(6,674
)


Income from operations
 
 
5,774
 
 
 
2,397
 
 
 
3,377
 


Net sales from our Vince Direct-to-consumer segment decreased $6,674, or 4.5%, to $143,096 in fiscal 2023 from $149,770 in fiscal 2022. Comparable sales decreased $5,444, or 3.8%, including e-commerce, primarily due to a decrease in e-commerce traffic. Non-comparable sales, which includes new stores that have not completed 13 full fiscal months of operations and Vince Unfold, declined by $2,296, offset by $1,066 of sales attributable to the 53rd week.  Since the end of fiscal 2022, four net stores have closed, bringing our total retail store count to 63 (consisting of 48 full price stores and 15 outlet stores) as of February 3, 2024, compared to 67 (consisting of 50 full price stores and 17 outlet stores) as of January 28, 2023.
Our Vince Direct-to-consumer segment had income from operations of $5,774 in fiscal 2023 compared to income from operations of $2,397 in fiscal 2022. The change was primarily driven by an improved gross margin, which was unfavorably impacted by royalty expenses associated with the License Agreement with ABG Vince. Additionally, fiscal 2022 included $1,014 of impairment charges related to the impairment of property and equipment associated with certain Vince retail locations.
Rebecca Taylor and Parker
 

















 
 
Twelve Months Ended
 


(in thousands)
 
February 3, 2024
 
 
January 28, 2023
 
 
$ Change
 


Net sales
 
$
191
 
 
$
38,297
 
 
$
(38,106
)


Income (loss) from operations
 
 
2,443
 
 
 
(21,255
)
 
 
23,698
 


Net sales from our Rebecca Taylor and Parker segment decreased $38,106, or 99.5%, to $191 in fiscal 2023 from $38,297 in fiscal 2022 primarily due to the wind down of the Rebecca Taylor and Parker businesses.
Income (loss) from operations from our Rebecca Taylor and Parker segment increased $23,698, or 111.5%, to income of $2,443 in fiscal 2023 from a loss of $21,255, in fiscal 2022.  The change was primarily driven by the wind down of the Rebecca Taylor business. In addition, income from operations for fiscal 2023 includes a net benefit of $1,750 from the wind down of the Rebecca Taylor business, primarily related to the release of operating lease liabilities as a result of lease terminations and a $765 gain associated with the sale of the Parker tradename, offset by$150 of transaction related expenses associated with the sale of the Parker tradename. Loss from operations for fiscal 2022 included $2,566 of impairment charges related to the impairment of the Rebecca Taylor tradename and property and equipment.
Liquidity and Capital Resources
Our sources of liquidity are cash and cash equivalents, cash flows from operations, if any, borrowings available under the 2023 Revolving Credit Facility and our ability to access the capital markets, including our Sales Agreement entered into with Virtu Americas LLC in June 2023 (see Note 9 "Stockholders' Equity" to the Consolidated Financial Statements in this Annual Report for further information). Our primary cash needs are funding working capital requirements, including royalty payments under the License Agreement, meeting our debt service requirements, and capital expenditures for new stores and related leasehold improvements. The most significant components of our working capital are cash and cash equivalents, accounts receivable, inventories, accounts payable and other current liabilities. Based on our current expectations, we believe that our sources of liquidity will generate sufficient cash flows to meet our obligations during the next twelve months from the date these financial statements are issued.
 
28

 
Operating Activities
 













 
 
Twelve Months Ended
 


(in thousands)
 
February 3, 2024
 
 
January 28, 2023
 


Operating activities
 
 
 
 
 
 


Net income (loss)
 
$
25,446
 
 
$
(38,346
)


Add (deduct) items not affecting operating cash flows:
 
 
 
 
 
 


Impairment of intangible assets
 
 
—
 
 
 
1,700
 


Impairment of long-lived assets
 
 
—
 
 
 
1,880
 


Depreciation and amortization
 
 
4,939
 
 
 
8,334
 


Provision for bad debt
 
 
104
 
 
 
424
 


Gain on sale of intangible assets
 
 
(32,808
)
 
 
(1,620
)


Loss on disposal of property and equipment
 
 
260
 
 
 
121
 


Amortization of deferred financing costs
 
 
758
 
 
 
1,267
 


Deferred income taxes
 
 
(4,021
)
 
 
2,866
 


Share-based compensation expense
 
 
1,541
 
 
 
2,095
 


Capitalized PIK Interest
 
 
4,026
 
 
 
2,869
 


Loss on debt extinguishment
 
 
3,136
 
 
 
—
 


Equity in net income of equity method investment, net of distributions
 
 
(121
)
 
 
—
 


Changes in assets and liabilities:
 
 
 
 
 
 


Receivables, net
 
 
(42
)
 
 
8,787
 


Inventories
 
 
31,236
 
 
 
(11,462
)


Prepaid expenses and other current assets
 
 
(655
)
 
 
1,198
 


Accounts payable and accrued expenses
 
 
(23,994
)
 
 
2,704
 


Other assets and liabilities
 
 
(8,165
)
 
 
(2,078
)


Net cash provided by (used in) operating activities
 
$
1,640
 
 
$
(19,261
)


Net cash provided by operating activities during fiscal 2023 was $1,640, which consisted of net income of $25,446, impacted by non-cash items of ($22,186) and cash used by working capital of $1,620. Net cash used by working capital resulted from cash outflows in accounts payable and accrued expenses of $23,994, primarily due to the timing of payments to vendors, cash outflows in other assets and liabilities of $8,165 primarily related to lease activity, offset by reductions in inventory of $31,236 primarily resulting from more efficient inventory management. 
Net cash used in operating activities during fiscal 2022 was $19,261 which consisted of a net loss of $38,346, impacted by non-cash items of $19,936 and cash used by working capital of $851. Net cash used by working capital resulted from a cash outflow in inventory of $11,462 primarily due to the increase of carry-over pre-fall and fall assortments as well as a higher investment in replenishment products, and higher product costs, partly offset by a cash inflow in receivables, net of $8,787 primarily due to the timing of collections.
Investing Activities
 













 
 
Twelve Months Ended
 


(in thousands)
 
February 3, 2024
 
 
January 28, 2023
 


Investing activities
 
 
 
 
 
 


Payments for capital expenditures
 
$
(1,460
)
 
$
(2,782
)


Transaction costs related to equity method investment
 
 
(525
)
 
 
—
 


Proceeds from sale of intangible assets
 
 
77,525
 
 
 
4,250
 


Net cash provided by investing activities
 
$
75,540
 
 
$
1,468
 


Net cash provided by investing activities of $75,540 during fiscal 2023 primarily represents $76,500 of proceeds received from the sale of the Vince intangible assets and $1,025 of proceeds received from the sale of the Parker intangible assets (see Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information).
Net cash provided by investing activities of $1,468 during fiscal 2022 represents the proceeds received from the sale of intangible assets (see Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for further information), partly offset by capital expenditures primarily related to the investment in our e-commerce platforms, as well as retail store buildouts, including leasehold improvements and store fixtures.
29

 
Financing Activities
 













 
 
Twelve Months Ended
 


(in thousands)
 
February 3, 2024
 
 
January 28, 2023
 


Financing activities
 
 
 
 
 
 


Proceeds from borrowings under the Revolving Credit Facilities
 
$
245,116
 
 
$
402,652
 


Repayment of borrowings under the Revolving Credit Facilities
 
 
(289,387
)
 
 
(378,778
)


Repayment of borrowings under the Term Loan Facilities
 
 
(29,378
)
 
 
(5,622
)


Proceeds from common stock issuance, net of certain fees
 
 
—
 
 
 
825
 


Tax withholdings related to restricted stock vesting
 
 
(142
)
 
 
(213
)


Proceeds from stock option exercises, restricted stock vesting, and issuance of common stock under employee stock purchase plan
 
 
48
 
 
 
75
 


Financing fees
 
 
(3,336
)
 
 
(1,128
)


Net cash (used in) provided by financing activities
 
$
(77,079
)
 
$
17,811
 


Net cash used in financing activities was $77,079 during fiscal 2023, primarily consisting of $44,271 of net repayments of borrowings under the Company's revolving credit facilities, the repayment of $29,378 of borrowings under the Term Loan Credit Facility, and financing fees of $3,336 (which includes a $553 prepayment penalty associated with the termination of the Term Loan Credit Facility during fiscal 2023). 
Net cash provided by financing activities was $17,811 during fiscal 2022, primarily consisting of $23,874 of net proceeds from borrowings under the 2018 Revolving Credit Facility, partly offset by the repayment of $5,622 of borrowings under the Term Loan Facility. 
Term Loan Credit Facility 
On September 7, 2021, Vince, LLC entered into a $35,000 senior secured term loan credit facility (the "Term Loan Credit Facility") pursuant to a Credit Agreement (the "Term Loan Credit Agreement"), as amended from time to time, by and among Vince, LLC, as the borrower, the guarantors named therein, PLC Agent, LLC, as administrative agent and collateral agent, and the other lenders from time to time party thereto. Vince Holding Corp. and Vince Intermediate Holding, LLC ("Vince Intermediate") were guarantors under the Term Loan Credit Facility. The Term Loan Credit Facility would have matured on the earlier of September 7, 2026, and 91 days after the maturity date of the 2018 Revolving Credit Facility. 
On May 25, 2023, utilizing proceeds from the Asset Sale, the Company repaid all outstanding amounts of $28,724, which included accrued interest and a prepayment penalty of $553 (which is included within financing fees on the Consolidated Statements of Cash Flows), under the Term Loan Credit Facility. The Term Loan Credit Facility was terminated. The Company also repaid $850 of fees due in accordance with an amendment entered into on September 30, 2022. Additionally, the Company recorded expense of $1,755 during fiscal 2023, related to the write-off of the remaining deferred financing costs. Prior to May 25, 2023, on an inception to date basis, the Company had made repayments of $7,335 on the Term Loan Credit Facility.
30

 
2023 Revolving Credit Facility
On June 23, 2023, Vince, LLC, entered into a new $85,000 senior secured revolving credit facility (the "2023 Revolving Credit Facility") pursuant to a Credit Agreement (the "2023 Revolving Credit Agreement") by and among Vince, LLC, the guarantors named therein, Bank of America, N.A. ("BofA"), as Agent, the other lenders from time to time party thereto, and BofA Securities, Inc., as sole lead arranger and sole bookrunner. 
All outstanding amounts under the 2018 Revolving Credit Facility (as defined below) were repaid in full and such facility was terminated pursuant to the terms thereof as a result of all parties completing their obligations under such facility. 
The 2023 Revolving Credit Facility provides for a revolving line of credit of up to the lesser of (i) the Borrowing Base (as defined in the 2023 Revolving Credit Agreement) and (ii) $85,000, as well as a letter of credit sublimit of $10,000. The 2023 Revolving Credit Agreement also permits Vince, LLC to request an increase in aggregate commitments under the 2023 Revolving Credit Facility of up to $15,000, subject to customary terms and conditions. The 2023 Revolving Credit Facility matures on the earlier of June 23, 2028, and 91 days prior to the earliest maturity date of any Material Indebtedness (as defined in the 2023 Revolving Credit Agreement), including the subordinated indebtedness pursuant to the Third Lien Credit Agreement. 
Interest is payable on the loans under the 2023 Revolving Credit Facility, at Vince LLC's request, either at Term SOFR, the Base Rate, or SOFR Daily Floating Rate, in each case, with applicable margins subject to a pricing grid based on an average daily excess availability calculation. The "Base Rate" means, for any day, a fluctuating rate per annum equal to the highest of (i) the Federal Funds Rate for such day, plus 0.5%; (ii) the rate of interest in effect for such day as publicly announced from time to time by BofA as its prime rate; (iii) the SOFR Daily Floating Rate on such day, plus 1.0%; and (iv) 1.0%. During the continuance of certain specified events of default, at the election of BofA in its capacity as Agent, interest will accrue at a rate of 2.0% in excess of the applicable non-default rate.
The applicable margins for SOFR Term and SOFR Daily Floating Rate Loans are: (i) 2.0% when the average daily Excess Availability (as defined in the 2023 Revolving Credit Agreement) is greater than 66.7% of the Loan Cap (as defined in the 2023 Revolving Credit Agreement); (ii) 2.25% when the average daily Excess Availability is greater than or equal to 33.3% but less than or equal to 66.7% of the Loan Cap; and (iii) 2.5% when the average daily Excess Availability is less than 33.3% of the Loan Cap. The applicable margins for Base Rate Loans are: (a) 1.0% when the average daily Excess Availability is greater than 66.7% of the Loan Cap; (b) 1.25% when the average daily Excess Availability is greater than or equal to 33.3% but less than or equal to 66.7% of the Loan Cap; and (c) 1.5% when the average daily Excess Availability is less than 33.3% of the Loan Cap. 
The 2023 Revolving Credit Facility contains a financial covenant requiring Excess Availability at all times to be no less than the greater of (i) 10.0% of the Loan Cap in effect at such time and (ii) $7,500. 
The 2023 Revolving Credit Facility contains representations and warranties, covenants and events of default that are customary for this type of financing, including limitations on the incurrence of additional indebtedness, liens, burdensome agreements, investments, loans, asset sales, mergers, acquisitions, prepayment of certain other debt, the repurchase of capital stock, transactions with affiliates, and the ability to change the nature of its business or its fiscal year. The 2023 Revolving Credit Facility generally permits dividends in the absence of any default or event of default (including any event of default arising from a contemplated dividend), so long as (i) after giving pro forma effect to the contemplated dividend and on a pro forma basis for the 30-day period immediately preceding such dividend, Excess Availability will be at least the greater of 20.0% of the Loan Cap and $15,000 and (ii) after giving pro forma effect to the contemplated dividend, the Consolidated Fixed Charge Coverage Ratio (as defined in the 2023 Revolving Credit Agreement) for the 12 months preceding such dividend will be greater than or equal to 1.0 to 1.0. 
All obligations under the 2023 Revolving Credit Facility are guaranteed by the Company and Vince Intermediate and any future subsidiaries of the Company (other than Excluded Subsidiaries as defined in the 2023 Revolving Credit Agreement) and secured by a lien on substantially all of the assets of the Company, Vince, LLC and Vince Intermediate and any future subsidiary guarantors, other than among others, equity interests in ABG Vince, as well as the rights of Vince, LLC under the License Agreement. 
The Company incurred a total of $1,150 of financing costs. In accordance with ASC Topic 470, "Debt", these financing costs were recorded as deferred debt issuance costs (which is presented within Other assets on the Consolidated Balance Sheets) and are amortized over the term of the 2023 Revolving Credit Facility. 
As of February 3, 2024, the Company was in compliance with applicable covenants. As of February 3, 2024, $35,473 was available under the 2023 Revolving Credit Facility, net of the Loan Cap, and there were $14,227 of borrowings outstanding and $5,053 of letters of credit outstanding under the 2023 Revolving Credit Facility. The weighted average interest rate for borrowings outstanding under the 2023 Revolving Credit Facility as of February 3, 2024 was 8.2%. 
 
 
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2018 Revolving Credit Facility
On August 21, 2018, Vince, LLC entered into an $80,000 senior secured revolving credit facility (the "2018 Revolving Credit Facility") pursuant to a credit agreement, as amended and restated from time to time, by and among Vince, LLC, as the borrower, VHC and Vince Intermediate, as guarantors, Citizens Bank, N.A. ("Citizens"), as administrative agent and collateral agent, and the other lenders from time to time party thereto. On January 31, 2023, the Company repaid $125 of fees due in accordance with an amendment entered into on September 30, 2022. Upon the contemporaneous consummation of the Asset Sale, the lenders' commitments to extend credit was reduced to $70,000. The 2018 Revolving Credit Facility would have matured on June 30, 2024. 
On June 23, 2023, all outstanding amounts under the 2018 Revolving Credit Facility were repaid in full and the 2018 Revolving Credit Facility was terminated pursuant to the terms thereof as a result of all parties completing their obligations under the 2018 Revolving Credit Facility. The Company recorded expense of $828 during fiscal 2023, related to the write-off of the remaining deferred financing costs. Certain letters of credit remain in place with Citizens which were secured with restricted cash, totaling $769 as of February 3, 2024. Restricted cash is included in Prepaid Expenses and other current assets in the Consolidated Balance Sheets.
Third Lien Credit Facility
On December 11, 2020, Vince, LLC entered into a $20,000 subordinated term loan credit facility (the "Third Lien Credit Facility") pursuant to a credit agreement (the "Third Lien Credit Agreement"),  as amended from time to time, dated December 11, 2020, by and among Vince, LLC, as the borrower, VHC and Vince Intermediate, as guarantors, and SK Financial Services, LLC ("SK Financial"), as administrative agent and collateral agent, and other lenders from time to time party thereto. The proceeds were received on December 11, 2020 and were used to repay a portion of the borrowings outstanding under the 2018 Revolving Credit Facility. 
SK Financial is an affiliate of Sun Capital Partners, Inc. ("Sun Capital"), whose affiliates own, as of February 3, 2024, approximately 68% of the Company's common stock. The Third Lien Credit Facility was reviewed and approved by the Special Committee of the Company's Board of Directors, consisting solely of directors not affiliated with Sun Capital, which committee was represented by independent legal advisors. 
Interest on loans under the Third Lien Credit Facility is payable in kind at a rate revised in connection with the Third Lien Third Amendment (as defined and discussed below) to be equal to the Daily Simple SOFR, subject to a credit spread adjustment of 0.10% per annum, plus 9.0%. During the continuance of certain specified events of default, interest may accrue on the loans under the Third Lien Credit Facility at a rate of 2.0% in excess of the rate otherwise applicable to such amount. 
The Company incurred $485 in deferred financing costs associated with the Third Lien Credit Facility of which a $400 closing fee is payable in kind and was added to the principal balance. These deferred financing costs are recorded as deferred debt issuance costs which will be amortized over the remaining term of the Third Lien Credit Facility.
All obligations under the Third Lien Credit Facility are guaranteed by the Company, Vince Intermediate and the Company's existing material domestic restricted subsidiaries as well as any future material domestic restricted subsidiaries and are secured on a junior basis relative to the 2023 Revolving Credit Facility by a lien on substantially all of the assets of the Company, Vince Intermediate, Vince, LLC and the Company's existing material domestic restricted subsidiaries as well as any future material domestic restricted subsidiaries.
On April 21, 2023, Vince, LLC entered into that certain Consent and Third Amendment to Credit Agreement (the "Third Lien Third Amendment"), which, among other things, (a) permitted the sale of the intellectual property of the Vince Business contemplated in the Asset Sale, (b) replaced LIBOR as an interest rate benchmark in favor of Daily Simple SOFR, subject to a credit spread adjustment of 0.10% per annum, plus 9.0% (c) amended the Third Lien Credit Agreement's maturity date to the earlier of (i) March 30, 2025 and (ii) 180 days after the maturity date under the 2018 Revolving Credit Facility, (d) reduced the capacity to incur indebtedness and liens, make investments, restricted payments and dispositions and repay certain indebtedness and (e) modified certain representations and warranties, covenants and events of default in respect of documentation related to the Asset Sale. The Third Lien Third Amendment became effective upon the consummation of the Asset Sale, the prepayment of the Term Loan Credit Facility in full and other transactions contemplated by the Asset Purchase Agreement. 
On June 23, 2023, Vince, LLC entered into the Fourth Amendment (the "Third Lien Fourth Amendment") to the Third Lien Credit Agreement which, among other things, (a) extended the Third Lien Credit Agreement's maturity date to the earlier of (i) September 30, 2028 and (ii) 91 days prior to the earliest maturity date of any Material Indebtedness (as defined therein) other than the 2023 Revolving Credit Facility and (b) modified certain representations and warranties, covenants and events of default in respect of documentation conforming to the terms of the 2023 Revolving Credit Facility.
 
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Contractual Obligations
The following table summarizes our contractual obligations as of February 3, 2024:
 


























 
 
Future payments due by fiscal year
 
 


(in thousands)
 
2024
 
 
2025-2026
 
 
2027-2028
 
 
Thereafter
 
 
Total
 
 


Unrecorded contractual obligations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Other contractual obligations (1)
 
$
43,257
 
 
$
3,604
 
 
$
—
 
 
$
—
 
 
$
46,861
 
 


Guaranteed Minimum Royalty payments
 
 
11,000
 
 
 
22,000
 
 
 
22,000
 
 
 
44,000
 
 
 
99,000
 
 


Recorded contractual obligations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Operating lease obligations
 
 
22,006
 
 
 
33,622
 
 
 
21,233
 
 
 
29,285
 
 
 
106,146
 
 


Long-term debt obligations
 
 
—
 
 
 
—
 
 
 
29,982
 
 
 
—
 
 
 
29,982
 
 


Total
 
$
76,263
 
 
$
59,226
 
 
$
73,215
 
 
$
73,285
 
 
$
281,989
 
 


 
(1) Consists primarily of inventory purchase obligations and service contracts.
 
The summary above does not include the following items: 
•As of February 3, 2024, we have recorded $556 of unrecognized tax benefits, excluding interest and penalties. We are unable to make reliable estimates of cash flows by period due to the inherent uncertainty surrounding the effective settlement of these positions.
•The Company has available the 2023 Revolving Credit Facility, which provides for a revolving line of credit of up to the lesser of (i) the Borrowing Base (as defined in the 2023 Revolving Credit Agreement) and (ii) $85,000, as well as a letter of credit sublimit of $10,000. The 2023 Revolving Credit Agreement also permits Vince, LLC to request an increase in aggregate commitments under the 2023 Revolving Credit Facility of up to $15,000, subject to customary terms and conditions. The 2023 Revolving Credit Facility matures on the earlier of June 23, 2028, and 91 days prior to the earliest maturity date of any Material Indebtedness (as defined in the 2023 Revolving Credit Agreement), including the subordinated indebtedness pursuant to the Third Lien Credit Agreement. 
•Interest is payable under the 2023 Revolving Credit Facility, which is calculated either at Term SOFR, the Base Rate, or SOFR Daily Floating Rate, in each case, with applicable margins subject to a pricing grid based on an average daily excess availability calculation. The "Base Rate" means, for any day, a fluctuating rate per annum equal to the highest of (i) the Federal Funds Rate for such day, plus 0.5%; (ii) the rate of interest in effect for such day as publicly announced from time to time by BofA as its prime rate; (iii) the SOFR Daily Floating Rate on such day, plus 1.0%; and (iv) 1.0%.  During the continuance of certain specified events of default, at the election of BofA in its capacity as Agent, interest will accrue at a rate of 2.0% in excess of the applicable non-default rate. See Note 5 "Long-Term Debt and Financing Arrangements" to the Consolidated Financial Statements in this Annual Report for additional information.
•Interest on loans under the Third Lien Credit Facility is payable in kind at a rate revised in connection with the Third Lien Third Amendment to be equal to the Daily Simple SOFR, subject to a credit spread adjustment of 0.10% per annum, plus 9.0%. During the continuance of certain specified events of default, interest may accrue on the loans under the Third Lien Credit Facility at a rate of 2.0% in excess of the rate otherwise applicable to such amount.  See Note 5 "Long-Term Debt and Financing Arrangements" to the Consolidated Financial Statements in this Annual Report for additional information.
Seasonality
The apparel and fashion industry in which we operate is cyclical and, consequently, our revenues are affected by general economic conditions and the seasonal trends characteristic to the apparel and fashion industry. Purchases of apparel are sensitive to a number of factors that influence the level of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt, interest rates and consumer confidence as well as the impact of adverse weather conditions. In addition, fluctuations in the amount of sales in any fiscal quarter are affected by the timing of seasonal wholesale shipments and other events affecting direct-to-consumer sales; as such, the financial results for any particular quarter may not be indicative of results for the fiscal year. We expect such seasonality to continue.
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Critical Accounting Estimates
Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 1 "Description of Business and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in this Annual Report, we believe the following discussion addresses our most critical accounting estimates, which involve significant subjectivity and judgment, and changes to such estimates or assumptions could have a material impact on our financial condition or operating results. Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results. With respect to critical accounting estimates, even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent consolidated results of operations. For more information on our accounting estimates and policies, please refer to the Notes to Consolidated Financial Statements in this Annual Report.
Revenue Recognition and Reserves for Allowances
The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. Sales are recognized when the control of the goods are transferred to the customer for the Company's wholesale businesses, upon receipt by the customer for the Company's e-commerce businesses, and at the time of sale to the consumer for the Company's retail businesses. Sales are measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. Variable consideration mainly includes discounts, chargebacks, markdown allowances, cooperative advertising programs, and sales returns. Estimated amounts of discounts, chargebacks, markdown allowances, cooperative advertising programs, and sales returns are accounted for as reductions of sales when the associated sale occurs. These estimated amounts are adjusted periodically based on changes in facts and circumstances when the changes become known. On the Company's consolidated balance sheet, reserves for sales returns are included within other accrued liabilities, and the value of inventory associated with reserves for sales returns are included in prepaid expenses and other current assets. The Company continues to estimate the amount of sales returns based on known trends and historical return rates. 
Accounts receivable are recorded net of allowances for expected future chargebacks and estimated margin support from wholesale partners. It is the nature of the apparel and fashion industry that suppliers like us face significant pressure from wholesale partners in the retail industry to provide allowances to compensate for their margin shortfalls. This pressure often takes the form of customers requiring us to provide price concessions on prior shipments as a prerequisite for obtaining future orders. Pressure for these concessions is largely determined by overall retail sales performance and, more specifically, the performance of our products at retail. To the extent our wholesale partners have more of our goods on hand at the end of the season, there will be greater pressure for us to grant markdown concessions on prior shipments. Our accounts receivable balances are reported net of expected allowances for these matters based on the historical level of concessions required and our estimates of the level of markdowns and allowances that will be required in the coming season. We evaluate the allowance balances on a continual basis and adjust them as necessary to reflect changes in anticipated allowance activity. 
At February 3, 2024, a hypothetical 1% change in the reserves for allowances would have resulted in a change of $52 in accounts receivable and net sales.
Inventory Valuation
Inventory values are reduced to net realizable value when there are factors indicating that certain inventories will not be sold on terms sufficient to recover their cost. Out-of-season inventories may be sold to off-price retailers and other customers who serve a customer base that will purchase prior year fashions and may be liquidated through our outlets and our e-commerce websites. The amount, if any, that these customers will pay for prior year fashions is determined by the desirability of the inventory itself as well as the general level of prior year goods available to these customers. The assessment of inventory value, as a result, is highly subjective and requires an assessment of the seasonality of the inventory, its future desirability, and future price levels in the off-price sector.
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In our wholesale businesses, some of our products are purchased for and sold to specific customers' orders. For the remainder of our business, products are purchased in anticipation of selling them to a specific customer based on historical trends. The loss of a major customer, whether due to the customer's financial difficulty or other reasons, could have a significant negative impact on the value of the inventory expected to be sold to that customer. This negative impact can also extend to inventory in-transit for which ownership has transferred to the Company. These obligations involve product to be received into inventory over the next one to six months.
At February 3, 2024, a hypothetical 1% change in the inventory obsolescence reserve would have resulted in a change of $47 in inventory, net of cost of products sold.
Fair Value Assessments of Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are tested for impairment at least annually and in an interim period if a triggering event occurs. As discussed in further detail below, we determined that a triggering event occurred in the Rebecca Taylor and Parker segment during the second quarter of fiscal 2022. 
An entity may elect to perform a qualitative impairment assessment for goodwill and indefinite-lived intangible assets. If adverse qualitative trends are identified during the qualitative assessment that indicate that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount, a quantitative impairment test is required. "Step one" of the quantitative impairment test for goodwill requires an entity to determine the fair value of each reporting unit and compare such fair value to the respective carrying amount. If the estimated fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired, and we are not required to perform further testing. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recorded for the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The goodwill impairment test is dependent on a number of factors, including estimates of projected revenues, EBITDA margins, long-term growth rates, working capital and discount rates. We base our estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
Prior to the closing of the Asset Sale, we estimated the fair value of our tradename intangible assets using a discounted cash flow valuation analysis, which is based on the "relief from royalty" methodology. This methodology assumes that in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. The relief from royalty approach is dependent on a number of factors, including estimates of projected revenues, royalty rates in the category of intellectual property and discount rates. We based our fair value estimates on assumptions we believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.  An impairment loss would have been recognized when the estimated fair value of the tradename intangible asset is less than the carrying value.  As of January 28, 2023, the indefinite-lived intangible asset was the Vince tradename. On April 21, 2023, the Company entered into the Authentic Transaction with Authentic and as a result, the Vince tradename and Vince customer relationships were classified as held for sale and amortization of the Vince customer relationships ceased. The Company closed the Asset Sale on May 25, 2023, and therefore no longer carries tradename intangible assets as of February 3, 2024.  See Note 2 "Recent Transactions" for further information.
An entity may pass on performing the qualitative assessment for a reporting unit or indefinite-lived intangible asset and directly perform the quantitative assessment. This determination can be made on an asset by asset basis, and an entity may resume performing a qualitative assessment in subsequent periods.
During the second quarter of fiscal 2022, the Company determined that a triggering event had occurred in the Rebecca Taylor and Parker segment as a result of changes to the Company's long-term projections. The Company performed an interim quantitative impairment assessment of the Rebecca Taylor tradename utilizing the relief from royalty valuation approach. The relief from royalty valuation approach is dependent on a number of factors, including estimates of projected revenues, royalty rates in the category of intellectual property, discount rates and other variables. The Company estimated the fair value of the Rebecca Taylor tradename intangible asset and determined that the fair value of the Rebecca Taylor tradename was below its carrying amount. Accordingly, the Company recorded an impairment charge for the Rebecca Taylor tradename intangible asset of $1,700, which was recorded within Impairment of intangible assets on the Consolidated Statement of Operations and Comprehensive Income (Loss) in fiscal 2022.
In both fiscal 2023 and fiscal 2022, the Company performed its annual impairment test during the fourth quarter. 
In fiscal 2023, the Company elected to perform a quantitative impairment test on goodwill allocated to the Company’s Vince Wholesale reporting unit. The results of the quantitative test did not result in any impairment because the fair value of the Company’s Vince Wholesale reporting unit exceeded its carrying value by 7.9%. The fair value of the Company's Vince Wholesale reporting unit was estimated using a combination of the income approach (the discounted cash flows method) and the market approach (guideline public company method). The guideline public company method applies a representative market multiple derived from revenue and EBITDA for a group of comparable public companies to the Company's financial forecasts. The more significant assumptions used in projecting the discounted cash flows included: a discount rate of 35%, which was determined from relevant market comparisons and adjusted for company specific risks, projected EBITDA margins of low double-digits based upon our current and past performance as 
35

 
well as industry data, and projected net sales for the discrete projection period ranging from low single-digits to high single-digits. Changes in these assumptions could have a significant impact on the valuation model. As an example, the impact of a hypothetical change in each of the significant assumptions is described below. In quantifying the impact, we changed only the specific assumption and held all other assumptions constant. A hypothetical 1% increase in the discount rate would decrease the fair value by approximately 3%. A hypothetical 1% decrease in net sales for each year included in the discrete projection period would decrease the fair value by approximately 1%. Finally, a hypothetical 1% decrease in the EBITDA margin rate for each year included in the discounted cash flow analysis would decrease the fair value by approximately 6%. Any changes in fair value resulting from changes in the assumptions discussed above could potentially result in the carrying amount of the Company’s Vince Wholesale reporting unit exceeding its estimated fair value, and therefore could require an impairment loss. 
In fiscal 2022, the Company elected to perform a quantitative impairment test on goodwill allocated to the Company's Vince Wholesale reporting unit. The results of the quantitative test did not result in any impairment because the fair value of the Company's Vince Wholesale reporting unit exceeded its carrying value. The fair value of the Company's Vince Wholesale reporting unit was estimated using a combination of the income approach (the discounted cash flows method) and the market approach (guideline public company method). The more significant assumptions used in projecting the discounted cash flows included: a discount rate of 20.0%, which was determined from relevant market comparisons and adjusted for company specific risks and projected EBITDA margins of low double-digits based upon our current and past performance as well as industry data. The guideline public company method applies a representative market multiple derived from revenue and EBITDA for a group of comparable public companies to the Company's financial forecasts. Changes in these assumptions could have a significant impact on the valuation model. 
Goodwill was $31,973 as of February 3, 2024 and January 28, 2023.
In the fourth quarter of fiscal 2022, the Company elected to perform a quantitative impairment test on its Vince tradename indefinite-lived intangible asset. The results of the quantitative test did not result in any impairment because the fair value of the Company's Vince tradename intangible asset exceeded its carrying value. The more significant assumptions used in projecting the discounted cash flows included: a discount rate of 20.0% for the Vince tradename, which was determined from relevant market comparisons and adjusted for company specific risks; low single-digit royalty rates and projected revenues based upon our current and past performance as well as industry data. Changes in these assumptions could have a significant impact on the valuation model.
On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. Therefore, the Company determined that the indefinite life classification was no longer appropriate for the Rebecca Taylor tradename and began amortizing the Rebecca Taylor tradename in the third quarter of fiscal 2022. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information. 
Indefinite-lived tradename intangible assets were $0 as of February 3, 2024 and $67,100 as of January 28, 2023, which is included within Intangible assets, net in our Consolidated Balance Sheets. 
Property and Equipment, Operating Lease Assets and Other Finite-Lived Intangible Assets
The Company reviews its property and equipment, operating lease assets and finite-lived intangible assets for impairment when the existence of facts and circumstances indicate that the useful life is shorter than previously estimated or that the carrying amount of the asset groups to which these assets relate may not be recoverable. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores is at the store level. Recoverability of these assets is evaluated by comparing the carrying value of the asset group with its estimated future undiscounted cash flows. If the comparisons indicate that the value of the asset is not recoverable, an impairment loss is calculated as the difference between the carrying value and the fair value of the assets within the asset group and the loss is recognized during that period. The estimates regarding recoverability and fair value can be affected by factors such as future store results, real estate demand, store closure plans, and economic conditions that can be difficult to predict.
During the second quarter of fiscal 2022, the Company determined the need to assess recoverability for certain Rebecca Taylor retail locations. For the Rebecca Taylor retail store asset groups that did not pass the recoverability assessment, the Company recorded non-cash asset impairment charges of $866 related to property and equipment. The fair value of the property and equipment was based on its estimated liquidation value. 
During the fourth quarter of fiscal 2022, the Company determined the need to assess recoverability for certain Vince retail locations. For the Vince retail store asset groups that did not pass the recoverability assessment, the Company recorded non-cash asset impairment charges of $1,014 related to property and equipment. The fair value of the property and equipment was based on its estimated liquidation value. 
 
 
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On April 21, 2023, the Company entered into the Authentic Transaction with Authentic and as a result, the Vince tradename and Vince customer relationships were classified as held for sale and amortization of the Vince customer relationships ceased. The Company closed the Asset Sale on May 25, 2023, and therefore no longer carries finite-lived intangible assets as of February 3, 2024. 	   See Note 2 "Recent Transactions" for further information.  The finite-lived intangible assets as of January 28, 2023 were comprised of the Vince customer relationships which were being amortized on a straight-line basis over their useful lives of 20 years. 
On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. Therefore, the Company determined that the indefinite life classification was no longer appropriate for the Rebecca Taylor tradename and began amortizing the Rebecca Taylor tradename in the third quarter of fiscal 2022. Amortization of the Rebecca Taylor tradename ceased upon classification as held for sale in the third quarter of fiscal 2022. On December 22, 2022, the Company completed the sale of the Rebecca Taylor tradename and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" in this Annual Report for further information. Additionally, during the third quarter of fiscal 2022, the Parker tradename was classified as held for sale and amortization ceased. Prior to its classification as held for sale, the Parker tradename intangible asset was being amortized on a straight-line basis over 10 years. On February 17, 2023, the Company completed the sale of the Parker tradename and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for further information.
Tax Receivable Agreement
In connection with the consummation of the IPO, we entered into a Tax Receivable Agreement with the Pre-IPO Stockholders. The Tax Receivable Agreement provides for payments to the Pre-IPO Stockholders in an amount equal to 85% of the aggregate reduction in taxes payable realized by the Company and its subsidiaries from the utilization of the Pre-IPO Tax Benefits (as defined therein). Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) changes in tax laws. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related payment obligations under the Tax Receivable Agreement. Therefore, we would only recognize a liability for the Tax Receivable Agreement obligation if we determine if it is probable that we will generate sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions, including revenue growth, operating margins, and projected retail location openings, among others. If we determine in the future that we will not be able to fully utilize all or part of the related tax benefits, we would derecognize the portion of the liability related to benefits not expected to be utilized. Alternatively, if we generate additional future taxable income beyond our current estimate, we would recognize additional liability related to benefits expected to be utilized. 
The Tax Receivable Agreement terminated per its terms on February 3, 2024. As of February 3, 2024, the Company's total obligation under the Tax Receivable Agreement was $0.  See Note 14 "Related Party Transactions" to the Consolidated Financial Statements in this Annual Report for additional information. 
Income taxes and Valuation Allowances
We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities at enacted rates. We assess the likelihood of the realization of deferred tax assets and adjust the carrying amount of these deferred tax assets by a valuation allowance to the extent we believe it more likely than not that all or a portion of the deferred tax assets will not be realized. We consider many factors when assessing the likelihood of future realization of deferred tax assets, including recent earnings results within taxing jurisdictions, expectations of future taxable income, the carryforward periods available and other relevant factors. Changes in the required valuation allowance are recorded in income in the period such determination is made. Significant judgment is required in determining the provision for income taxes. Changes in estimates may create volatility in our effective tax rate in future periods for various reasons, including changes in tax laws or rates, changes in forecasted amounts of pretax income (loss), settlements with various tax authorities, either favorable or unfavorable, the expiration of the statute of limitations on some tax positions and obtaining new information about particular tax positions that may cause management to change its estimates. The ultimate tax outcome is uncertain for certain transactions. We recognize tax positions in our Consolidated Balance Sheets as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with tax authorities assuming full knowledge of the position and all relevant facts.
Due to the uncertain nature of the realization of our deferred income tax assets, during the fourth quarter of fiscal 2016, we recorded valuation allowances within Provision for income taxes on the Consolidated Statements of Operations and Comprehensive Income (Loss). During fiscal 2023, the Company maintained a full valuation allowance on all deferred tax assets that have a definite life as we do not believe it is more likely than not that such deferred tax assets will be recognized. Indefinite-lived net operating losses have been recognized to the extent we believe they can be utilized against indefinite-lived deferred tax liabilities. This valuation 
37

 
allowance is subject to periodic review, and if the allowance is reduced, the tax benefit will be recorded in the future operations as a reduction of our income tax expense. 
Recent Accounting Pronouncements
For information on certain recently issued or proposed accounting standards which may impact the Company, please refer to the notes to Consolidated Financial Statements in this Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a "smaller reporting company" as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we are not required to provide the information in this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See "Index to the Audited Consolidated Financial Statements," which is located on page F-1 appearing at the end of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Attached as exhibits to this Annual Report are certifications of our Chief Executive Officer and Chief Financial Officer. Rule 13a-14 of the Exchange Act requires that we include these certifications with this report. This Controls and Procedures section includes information concerning the disclosure controls and procedures referred to in the certifications. You should read this section in conjunction with the certifications.
Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of February 3, 2024.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting as described below.
As a result of the material weakness identified, we performed additional analysis, substantive testing and other post-closing procedures intended to ensure that our consolidated financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the consolidated financial statements and related notes thereto included in this Annual Report on Form 10-K fairly present, in all material respects, the Company's financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), that occurred during the fiscal quarter ended February 3, 2024 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding 
38

 
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of February 3, 2024. In making this assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013). Based on this assessment, management has concluded that, as of February 3, 2024, our internal control over financial reporting was not effective, as management identified a deficiency in internal control over financial reporting that was determined to rise to the level of a material weakness. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
We previously disclosed in our Annual Report on Form 10-K for the period ended January 28, 2023, as well as in our Quarterly Reports on Form 10-Q for each interim period in fiscal 2023, a material weakness in our internal control over financial reporting relating to the following: 
IT general controls
We did not maintain adequate user access controls to ensure appropriate segregation of duties and to adequately restrict access to financial applications and data.
This material weakness did not result in a material misstatement to the annual or interim consolidated financial statements. However, this material weakness could impact the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in a misstatement impacting account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the company to provide only management's report in this Annual Report.
Remediation Efforts to Address the Material Weakness 
To date, we made continued progress on our comprehensive remediation plan related to this material weakness by implementing the following controls and procedures: 
•The Company modified its system access rights to limit the use of generic ID's, particularly in instances where those ID's possessed privileged access rights; and
•The Company effectively designed and implemented a full recertification of AX user access rights. 
To fully address the remediation of deficiencies related to segregation of duties, we will need to fully remediate the deficiencies regarding systems access.
Management continues to follow a comprehensive remediation plan to fully address this material weakness. The remediation plan includes implementing and effectively operating controls related to the routine reviews of user system access and user re-certifications, inclusive of those related to users with privileged access, as well as, to ensure user's access rights to systems are removed timely upon termination.
While we have reported a material weakness that is not yet remediated, we believe we have made continued progress in addressing financial, compliance, and operational risks and improving controls across the Company. Until the material weakness is remediated, we will continue to perform additional analysis, substantive testing, and other post-closing procedures to ensure that our consolidated financial statements are prepared in accordance with U.S. GAAP.
Limitations on the Effectiveness of Disclosure Controls and Procedures
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure system are met. Also, projections of any evaluation of effectiveness to future periods are subject 
39

 
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ITEM 9B. OTHER INFORMATION.
None of our directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended February 3, 2024.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. 
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item is incorporated herein by reference from the Company's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2024 annual meeting of stockholders. Our definitive proxy statement will be filed on or before 120 days after the end of fiscal 2023.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by reference from the Company's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2024 annual meeting of stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this Item is incorporated herein by reference from the Company's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2024 annual meeting of stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this Item is incorporated herein by reference from the Company's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2024 annual meeting of stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this Item is incorporated herein by reference from the Company's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2024 annual meeting of stockholders.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)Financial Statements and Financial Statement Schedules. See "Index to the Audited Consolidated Financial Statements" which is located on F-1 of this Annual Report on Form 10-K.
(b)Exhibits. See the Exhibit Index which is included herein.
40

 
Exhibit Index:
 







ExhibitNumber
 
Exhibit Description


 
 


  3.1
 
Amended & Restated Certificate of Incorporation of Vince Holding Corp. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


  3.2
 
Amended & Restated Bylaws of Vince Holding Corp. (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


  3.3
 
Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.01 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2017).


  4.1
 
Form of Stock certificate (incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 25, 2018).


  4.2
 
Registration Agreement, dated as of February 20, 2008, among Apparel Holding Corp., Sun Cardinal, LLC, SCSF Cardinal, LLC and the Other Investors party thereto (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-1 (File No. 333-191336) filed with the Securities and Exchange Commission on September 24, 2013).


  4.3
 
Description of Vince Holding Corp.'s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 11, 2020).


10.1
 
Intellectual Property Purchase Agreement, dated as of April 21, 2023, by and among ABG-Viking, LLC as Buyer, Vince, LLC as Seller, solely for purposes of Sections 6.10, 6.13, 6.14, 9.13 and 9.15 thereof, the Company as Seller Guarantor and solely for purposes of Sections 5.5 and 9.16 thereof, ABG Intermediate Holdings 2 LLC as Buyer Guarantor (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2023).


10.2
 
Tax Receivable Agreement, dated as of November 27, 2013, between Vince Intermediate Holding, LLC, the Stockholders, and Sun Cardinal, LLC as Stockholder Representative (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


10.3
 
Consulting Agreement, dated as of November 27, 2013, between Vince Holding Corp. and Sun Capital Partners Management V, LLC (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


10.4†
 
Form of Indemnification Agreement (for directors and officers affiliated with Sun Capital Partners, Inc.) (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


10.5†
 
Form of Indemnification Agreement (for directors and officers not affiliated with Sun Capital Partners, Inc.) (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


10.6†
 
Vince Holding Corp. Amended and Restated 2013 Omnibus Incentive Plan   (incorporated by reference to Annex A to the Company's Information Statement on Schedule 14C filed with the Securities and Exchange Commission on November 7, 2023).


10.7†
 
Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.15 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


10.8†
 
Form of Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.16 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013).


10.9†
 
Vince Holding Corp. Amended and Restated 2013 Employee Stock Purchase Plan (incorporated by reference to Annex A to the Company's Information Statement on Schedule 14C filed with the Securities and Exchange Commission on September 3, 2015).


10.10
 
First Amendment to the Tax Receivable Agreement, dated as of September 1, 2015, between Vince Holding Corp., the Stockholders, and the Stockholder Representative (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 10, 2015).


41

 







ExhibitNumber
 
Exhibit Description


 
 


10.11†
 
Employment Offer Letter, dated as of January 12, 2016, by and between Vince, LLC and David Stefko (incorporated by reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2016).


10.12
 
Agreement, dated as of July 13, 2017, by and between Vince, LLC and Rebecca Taylor, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2017).


10.13†
 
Employment Offer Letter, dated as of January 10, 2017, by and between Vince, LLC and Marie Fogel (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 12, 2019).


10.14†
 
Amendment No. 1 to Employment Offer Letter, dated as of July 11, 2017, by and between Vince, LLC and Marie Fogel (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 12, 2019).


10.15†
 
Amendment No. 2 to Employment Offer Letter, dated as of June 29, 2018, by and between Vince, LLC and Marie Fogel (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 12, 2019).


10.16†
 
Amendment No. 3 to Employment Offer Letter, dated March 1, 2021, by and between Vince, LLC and Marie Fogel (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.17
 
Credit Agreement ("2018 Revolving Credit Facility Credit Agreement"), dated as of August 21, 2018, by and among Vince, LLC as the borrower, the guarantors named therein, Citizens Bank, N.A., as administrative agent and collateral agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 22, 2018).


10.18
 
First Amendment to 2018 Revolving Credit Facility Credit Agreement, dated November 1, 2019 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 12, 2019).


10.19
 
Joinder, Confirmation, Ratification, Commitment Increase and Second Amendment to Credit Agreement and Ancillary Documents, dated as of November 4, 2019, by and among Vince, LLC, as borrower, the guarantors named therein, Rebecca Taylor, Inc., Parker Holding, LLC, Parker Lifestyle, LLC, Rebecca Taylor Retail Store, LLC, Citizens Bank, N.A., as the administrative agent under 2018 Revolving Credit Facility Credit Agreement, and other lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities Exchange Commission on November 5, 2019).


10.20
 
Third Amendment to 2018 Revolving Credit Facility Credit Agreement, dated June 8, 2020 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 15, 2020).


10.21
 
Amendment and Consent, dated June 23, 2020, to 2018 Term Loan Facility Credit Agreement and 2018 Revolving Credit Facility Credit Agreement (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 15, 2020).


10.22
 
Fifth Amendment to 2018 Revolving Credit Facility Credit Agreement, dated December 11, 2020 (incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.23
 
Credit Agreement ("2018 Term Loan Facility Credit Agreement"), dated as of August 21, 2018, by and among Vince, LLC as the borrower, the guarantors named therein, Crystal Financial, LLC, as administrative agent and collateral agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2018).


10.24
 
Joinder, Confirmation, Ratification, Commitment Increase and Amendment to Credit Agreement and Related Documents, dated as of November 4, 2019, by and among Vince, LLC, as the borrower, the guarantors named therein, Rebecca Taylor, Inc., Rebecca Taylor Retail Store, LLC, Parker Lifestyle, LLC, Parker Holding, LLC and Crystal Financial LLC, as administrative agent and collateral agent under 2018 Term Loan Facility Credit Agreement 


42

 







ExhibitNumber
 
Exhibit Description


 
 


 
 
(incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 11, 2020).


10.25
 
Limited Waiver and Amendment to 2018 Term Loan Facility Credit Agreement, dated March 30, 2020 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 31, 2020).


10.26
 
Third Amendment to 2018 Term Loan Facility Credit Agreement, dated June 8, 2020 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 15, 2020).


10.27
 
Fifth Amendment to 2018 Term Loan Facility Credit Agreement, dated December 11, 2020 (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.28†
 
Form of Restricted Stock Unit Agreement with respect to RSUs granted to David Stefko on May 25, 2018 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 12, 2019).


10.29†
 
Form of Restricted Stock Unit Agreement with respect to RSUs granted pursuant to the Company's annual long-term incentive program (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 12, 2019).


10.30†
 
Form of Restricted Stock Unit Agreement with respect to RSUs granted pursuant to the Company's 2018 Option Exchange (incorporated by reference to Exhibit (d)(9) to the Company's Tender Offer Statement on Schedule TO filed with the Securities and Exchange Commission on April 26, 2018).


10.31
 
Equity Purchase Agreement, dated November 4, 2019 and effective November 3, 2019, by and between Vince, LLC and Contemporary Lifestyle Group, LLC (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Securities Exchange Commission on November 5, 2019).


10.32†
 
Employment Offer Letter, dated May 23, 2019, by and between Vince, LLC and Lee Meiner (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 11, 2020).


10.33†
 
Amendment No.1 to Employment Offer Letter, dated March 1, 2021, by and between Vince, LLC and Lee Meiner (incorporated by reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.34†
 
Updated Terms to Employment, dated July 15, 2022, by and between Vince, LLC and Lee Meiner (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 28, 2023).


10.35
 
Credit Agreement, dated as of December 11, 2020, by and among Vince, LLC as the borrower and the guarantors named therein, SK Financial Services, LLC as administrative agent and collateral agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.36†
 
Employment Agreement, dated March 8, 2021 by and between Vince, LLC and Jonathan "Jack" Schwefel (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.37†
 
Employment Offer Letter, dated April 5, 2021, by and between Vince, LLC and Akiko Okuma (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.38
 
Sixth Amendment to 2018 Revolving Credit Facility Credit Agreement, dated April 26, 2021 (incorporated by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


10.39
 
Sixth Amendment to 2018 Term Loan Facility Credit Agreement, dated April 26, 2021 (incorporated by reference to Exhibit 10.48 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2021).


43

 







ExhibitNumber
 
Exhibit Description


 
 


10.40
 
Credit Agreement, dated as of September 7, 2021, by and among Vince, LLC as the borrower, the guarantors named therein, PLC Agent, LLC, as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 9, 2021)


10.41
 
Amended and Restated Credit Agreement, dated as of September 7, 2021, by and among Vince, LLC as the borrower, the guarantors named therein, Citizens Bank, N.A., as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 9, 2021).


10.42
 
First Amendment to Credit Agreement, dated as of September 7, 2021, by and among Vince, LLC as the borrower, SK Financial Services, LLC, as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 9, 2021).


10.43
 
First Amendment to Credit Agreement, dated as of September 30, 2022, by and among Vince, LLC as the borrower, the guarantors named therein, PLC Agent, LLC, as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 13, 2022).


10.44
 
First Amendment to Amended and Restated Credit Agreement, dated as of September 30, 2022, by and among Vince, LLC as the borrower, the guarantors named therein, Citizens Bank, N.A., as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 13, 2022).


10.45
 
Second Amendment to Credit Agreement, dated as of September 30, 2022, by and among Vince, LLC as the borrower, SK Financial Services, LLC, as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 13, 2022).


10.46
 
Consent and Second Amendment to Amended and Restated Credit Agreement and First Amendment to Security Agreement, dated as of April 21, 2023, by and among Vince, LLC as the borrower, the guarantors named therein, Citizens Bank, N.A., as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 13, 2023).


10.47
 
Consent and Third Amendment to Credit Agreement, dated as of April 21, 2023, by and among Vince, LLC as the borrower, SK Financial Services, LLC, as agent, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 13, 2023).


10.48
 
Amended and Restated Limited Liability Company Agreement of ABG-Vince LLC (f/k/a ABG-Viking, LLC), dated as of May 25, 2023, by and between ABG Intermediate Holdings 2 LLC and Vince, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 25, 2023).


10.49
 
License Agreement, dated as of May 25, 2023, by and between ABG-Vince LLC (f/k/a ABG-Viking, LLC) as licensor and Vince, LLC as licensee (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 25, 2023).


10.50
 
Credit Agreement, dated as of June 23, 2023, by and among Vince, LLC, the guarantors named therein, Bank of America, N.A., as Agent, the other lenders from time to time party thereto, and BofA Securities, Inc., as sole lead arranger and sole bookrunner (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 26, 2023.


10.51
 
Fourth Amendment to Credit Agreement, dated as of June 23, 2023, by and among Vince, LLC as the borrower, SK Financial Services, LLC, as agent and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 26, 2023).


44

 







ExhibitNumber
 
Exhibit Description


 
 


10.52
 
Sales Agreement, dated as of June 30, 2023, between the Company and Virtu Americas LLC (incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 30, 2023) (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities Exchange Commission on September 15, 2023).


10.53
 
Amendment No. 1 to License Agreement, dated as of July 25, 2023.


10.54
 
Amendment No. 2 to License Agreement, dated as of February 21, 2024.


10.55†
 
Employment Offer Letter, dated January 17, 2023, by and between Vince, LLC and Amy “Levy” Trooskin.


10.56†
 
Updated Terms to Employment, dated March 14, 2023, by and between Vince, LLC and Amy “Levy” Trooskin.


10.57†
 
General Release Agreement, dated June 16, 2023, by and between Vince, LLC and Amy “Levy” Trooskin.


10.58†
 
Employment Offer Letter, dated November 6, 2023, by and between Vince, LLC and John Szczepanski.


21.1
 
List of subsidiaries of Vince Holding Corp. 


23.1
 
Consent of PricewaterhouseCoopers LLP


31.1
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


31.2
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


32.1
 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


32.2
 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


97.1
 
Vince Holding Corp. Compensation Recovery Policy


101.INS
 
Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


101.SCH
 
Inline XBRL Taxonomy Extension Schema


101.CAL
 
Inline XBRL Taxonomy Extension Calculation


101.PRE
 
Inline XBRL Taxonomy Extension Presentation


101.LAB
 
Inline XBRL Taxonomy Extension Labels


101.DEF
 
Inline XBRL Taxonomy Extension Definition


104
 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


 
† Indicates exhibits that constitute management contracts or compensatory plans or arrangements
ITEM 16. FORM 10-K SUMMARY.
None.
 
 
45

 
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 









Date:         May 2, 2024
 
VINCE HOLDING CORP.


 
 
 
 


 
 
By:
 
/s/ David Stefko


 
 
Name:
 
David Stefko


 
 
Title:
 
Interim Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates listed.
 









Signature
 
Title
 
Date


 
 
 


/s/ David Stefko
 
Interim Chief Executive Officer (Principal Executive Officer) (Director) 
 
May 2, 2024


David Stefko
 
 
 
 


 
 
 


/s/ John Szczepanski
 
Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)
 
May 2, 2024


John Szczepanski
 
 
 


 
 
 


/s/ Matthew Garff
 
Director
 
May 2, 2024


Matthew Garff
 
 
 
 


 
 
 


/s/ Jerome Griffith
 
Director
 
May 2, 2024


Jerome Griffith
 
 
 
 


 
 
 


/s/ Robin Kramer
 
Director
 
May 2, 2024


Robin Kramer
 
 
 
 


 
 
 


/s/ Michael Mardy
 
Director
 
May 2, 2024


Michael Mardy
 
 
 
 


 
 
 


/s/ Eugenia Ulasewicz
 
Director
 
May 2, 2024


Eugenia Ulasewicz
 
 
 
 


 
 

 
INDEX TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
 








Consolidated Financial Statements
 
 
 


Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm (PCAOB ID 238)
 
F-2
 


Consolidated Balance Sheets
 
F-4
 


Consolidated Statements of Operations and Comprehensive Income (Loss)
 
F-5
 


Consolidated Statements of Stockholders' Equity 
 
F-6
 


Consolidated Statements of Cash Flows
 
F-7
 


Notes to Consolidated Financial Statements
 
F-8
 


 
 
 
 


Financial Statement Schedule
 
 
 


 
 
 
 


Schedule II—Valuation and Qualifying Accounts
 
F-31
 


 
 
F-1

 
Report of Independent Registered Public Accounting Firm
 
To the Board of Directors and Stockholders of Vince Holding Corp.
 
 
Opinion on the Financial Statements
 
We have audited the accompanying consolidated balance sheets of Vince Holding Corp. and its subsidiaries (the “Company”) as of February 3, 2024 and January 28, 2023, and the related consolidated statements of operations and comprehensive income (loss), of stockholders’ equity and of cash flows for the years then ended, including the related notes and financial statement schedule listed in the index appearing on page F-1 for the years ended February 3, 2024 and January 28, 2023 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. 
 
Basis for Opinion
 
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
Critical Audit Matters
 
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
 
Goodwill Impairment Assessment - Vince Wholesale Reporting Unit
 
As described in Notes 1 and 3 to the consolidated financial statements, the Company’s consolidated goodwill balance was $32.0 million as of February 3, 2024. Goodwill is tested for impairment at least annually and in an interim period if a triggering event occurs. Management compares the fair value of the reporting unit to the carrying amount. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recorded for the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Fair value is estimated by management using a combination of the income approach (the discounted cash flows method) and the market approach (guideline public company method). Determining the fair value is judgmental in nature and requires the use of 
F-2

 
significant estimates and assumptions by management. The development of discounted cash flows is dependent on a number of factors, including estimates of projected revenues, EBITDA margins, long term growth rates, working capital, and discount rates. 
 
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Vince Wholesale reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to estimates of projected revenues, EBITDA margins, and the discount rate used in the development of discounted cash flows; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 
 
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) testing management’s process for determining the fair value of the reporting unit; (ii) evaluating the appropriateness of the discounted cash flow approach; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow approach; and (iv) evaluating the significant assumptions related to estimates of projected revenues, EBITDA margins, and the discount rate. Evaluating management’s assumptions related to estimates of projected revenues and EBITDA margins involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the Vince Wholesale reporting unit; (ii) the consistency with industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow approach and the discount rate assumption.
 
 
 
/s/ PricewaterhouseCoopers LLP
New York, New York
May 2, 2024
 
We have served as the Company's auditor since 2012.
 
 
F-3

 
VINCE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 













 
 
February 3,
 
 
January 28,
 


 
 
2024
 
 
2023
 


Assets
 
 
 
 
 
 


Current assets:
 
 
 
 
 
 


Cash and cash equivalents
 
$
357
 
 
$
1,079
 


Trade receivables, net of allowance for doubtful accounts of $377 and $759 at February 3, 2024 and January 28, 2023, respectively
 
 
20,671
 
 
 
20,733
 


Inventories, net
 
 
58,777
 
 
 
90,008
 


Prepaid expenses and other current assets
 
 
4,997
 
 
 
3,515
 


Total current assets
 
 
84,802
 
 
 
115,335
 


Property and equipment, net
 
 
6,972
 
 
 
10,479
 


Operating lease right-of-use assets, net
 
 
73,003
 
 
 
72,616
 


Intangible assets, net
 
 
—
 
 
 
70,106
 


Goodwill
 
 
31,973
 
 
 
31,973
 


Assets held for sale
 
 
—
 
 
 
260
 


Equity method investment
 
 
26,147
 
 
 
—
 


Other assets
 
 
2,252
 
 
 
2,576
 


Total assets
 
$
225,149
 
 
$
303,345
 


 
 
 
 
 
 
 


Liabilities and Stockholders' Equity
 
 
 
 
 
 


Current liabilities:
 
 
 
 
 
 


Accounts payable
 
$
31,678
 
 
$
49,396
 


Accrued salaries and employee benefits
 
 
3,967
 
 
 
4,301
 


Other accrued expenses 1
 
 
8,980
 
 
 
15,020
 


Short-term lease liabilities
 
 
16,803
 
 
 
20,892
 


Current portion of long-term debt
 
 
—
 
 
 
3,500
 


Total current liabilities
 
 
61,428
 
 
 
93,109
 


Long-term debt 2
 
 
43,950
 
 
 
108,078
 


Long-term lease liabilities
 
 
67,705
 
 
 
72,098
 


Deferred income tax liability
 
 
4,913
 
 
 
8,934
 


Other liabilities
 
 
—
 
 
 
869
 


 
 
 
 
 
 
 


Commitments and contingencies (Note 10)
 
 
 
 
 
 


 
 
 
 
 
 
 


Stockholders' equity:
 
 
 
 
 
 


Common stock at $0.01 par value (100,000,000 shares authorized, 12,506,556 and 12,335,405 shares issued and outstanding at February 3, 2024 and January 28, 2023, respectively)
 
 
125
 
 
 
123
 


Additional paid-in capital
 
 
1,144,740
 
 
 
1,143,295
 


Accumulated deficit
 
 
(1,097,634
)
 
 
(1,123,080
)


Accumulated other comprehensive loss
 
 
(78
)
 
 
(81
)


Total stockholders' equity
 
 
47,153
 
 
 
20,257
 


Total liabilities and stockholders' equity
 
$
225,149
 
 
$
303,345
 


 
1 Includes accrued royalty expense of $361, which is with a related party.
2 Includes Third Lien Credit Facility of $29,982, which is with a related party.
See accompanying notes to Consolidated Financial Statements.
 
F-4

 
VINCE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data)
 












 
Fiscal Year
 


 
2023
 
 
2022
 


Net sales
$
292,890
 
 
$
357,442
 


Cost of products sold 3
 
159,598
 
 
 
219,472
 


Gross profit
 
133,292
 
 
 
137,970
 


Impairment of intangible assets
 
—
 
 
 
1,700
 


Impairment of long-lived assets
 
—
 
 
 
1,880
 


Gain on sale of intangible assets
 
(32,808
)
 
 
(1,620
)


Selling, general and administrative expenses
 
134,476
 
 
 
161,432
 


Income (loss) from operations
 
31,624
 
 
 
(25,422
)


Interest expense, net 4
 
11,118
 
 
 
9,887
 


Income (loss) before income taxes and equity in net income of equity method investment
 
20,506
 
 
 
(35,309
)


(Benefit) provision for income taxes
 
(3,478
)
 
 
3,037
 


Income (loss) before equity in net income of equity method investment
 
23,984
 
 
 
(38,346
)


Equity in net income of equity method investment
 
1,462
 
 
 
—
 


Net income (loss)
$
25,446
 
 
$
(38,346
)


Other comprehensive income (loss):
 
 
 
 
 


Foreign currency translation adjustments
 
3
 
 
 
41
 


Comprehensive income (loss)
$
25,449
 
 
$
(38,305
)


Earnings (loss) per share:
 
 
 
 
 


Basic earnings (loss) per share
$
2.05
 
 
$
(3.14
)


Diluted earnings (loss) per share
$
2.04
 
 
$
(3.14
)


Weighted average shares outstanding:
 
 
 
 
 


Basic
 
12,442,781
 
 
 
12,223,004
 


Diluted
 
12,478,215
 
 
 
12,223,004
 


 
3 Includes royalty expense of $9,486, which is with a related party.
4 Includes capitalized PIK interest with the Third Lien Credit Facility of $4,026, which is with a related party.
See accompanying notes to Consolidated Financial Statements.
F-5

 
VINCE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
(In thousands, except share amounts)
 





























 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
Number of Shares Outstanding
 
 
Par Value
 
 
Additional Paid-In Capital
 
 
Accumulated Deficit
 
 
Accumulated Other Comprehensive Loss
 
 
Total Stockholders' Equity
 


Balance as of January 29, 2022
 
 
11,986,127
 
 
$
120
 
 
$
1,140,516
 
 
$
(1,084,734
)
 
$
(122
)
 
$
55,780
 


Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Net loss
 
 
—
 
 
 
—
 
 
 
—
 
 
 
(38,346
)
 
 
—
 
 
 
(38,346
)


Foreign currency translation adjustment
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
41
 
 
 
41
 


Common stock issuance, net of certain fees
 
 
104,980
 
 
 
1
 
 
 
824
 
 
 
—
 
 
 
—
 
 
 
825
 


Share-based compensation expense
 
 
—
 
 
 
—
 
 
 
2,095
 
 
 
—
 
 
 
—
 
 
 
2,095
 


Restricted stock unit vestings
 
 
259,972
 
 
 
2
 
 
 
(2
)
 
 
—
 
 
 
—
 
 
 
—
 


Tax withholdings related to restricted stock vesting
 
 
(25,199
)
 
 
—
 
 
 
(213
)
 
 
—
 
 
 
—
 
 
 
(213
)


Issuance of common stock related to Employee Stock Purchase Plan ("ESPP")
 
 
9,525
 
 
 
—
 
 
 
75
 
 
 
—
 
 
 
—
 
 
 
75
 


Balance as of January 28, 2023
 
 
12,335,405
 
 
 
123
 
 
 
1,143,295
 
 
 
(1,123,080
)
 
 
(81
)
 
 
20,257
 


Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Net income
 
 
—
 
 
 
—
 
 
 
—
 
 
 
25,446
 
 
 
—
 
 
 
25,446
 


Foreign currency translation adjustment
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
3
 
 
 
3
 


Common stock issuance, net of certain fees
 
 
-
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 


Share-based compensation expense
 
 
—
 
 
 
—
 
 
 
1,541
 
 
 
—
 
 
 
—
 
 
 
1,541
 


Restricted stock unit vestings
 
 
183,132
 
 
 
2
 
 
 
(2
)
 
 
—
 
 
 
—
 
 
 
—
 


Tax withholdings related to restricted stock vesting
 
 
(28,886
)
 
 
—
 
 
 
(142
)
 
 
—
 
 
 
—
 
 
 
(142
)


Issuance of common stock related to ESPP
 
 
16,905
 
 
 
—
 
 
 
48
 
 
 
—
 
 
 
—
 
 
 
48
 


Balance as of February 3, 2024
 
 
12,506,556
 
 
$
125
 
 
$
1,144,740
 
 
$
(1,097,634
)
 
$
(78
)
 
$
47,153
 


See accompanying notes to Consolidated Financial Statements.
 
F-6

 
 VINCE HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 













 
 
Twelve Months Ended
 


 
 
February 3, 2024
 
 
January 28, 2023
 


Operating activities
 
 
 
 
 
 


Net income (loss)
 
$
25,446
 
 
$
(38,346
)


Add (deduct) items not affecting operating cash flows:
 
 
 
 
 
 


Impairment of intangible assets
 
 
—
 
 
 
1,700
 


Impairment of long-lived assets
 
 
—
 
 
 
1,880
 


Depreciation and amortization
 
 
4,939
 
 
 
8,334
 


Allowance for doubtful accounts
 
 
104
 
 
 
424
 


Gain on sale of intangible assets
 
 
(32,808
)
 
 
(1,620
)


Loss on disposal of property and equipment
 
 
260
 
 
 
121
 


Amortization of deferred financing costs
 
 
758
 
 
 
1,267
 


Deferred income taxes
 
 
(4,021
)
 
 
2,866
 


Share-based compensation expense
 
 
1,541
 
 
 
2,095
 


Capitalized PIK Interest due to loan with related party
 
 
4,026
 
 
 
2,869
 


Loss on debt extinguishment
 
 
3,136
 
 
 
—
 


Equity in net income of equity method investment, net of distributions
 
 
(121
)
 
 
—
 


Changes in assets and liabilities:
 
 
 
 
 
 


Receivables, net
 
 
(42
)
 
 
8,787
 


Inventories
 
 
31,236
 
 
 
(11,462
)


Prepaid expenses and other current assets
 
 
(655
)
 
 
1,198
 


Accounts payable and accrued expenses
 
 
(23,994
)
 
 
2,704
 


Other assets and liabilities
 
 
(8,165
)
 
 
(2,078
)


Net cash provided by (used in) operating activities
 
 
1,640
 
 
 
(19,261
)


Investing activities
 
 
 
 
 
 


Payments for capital expenditures
 
 
(1,460
)
 
 
(2,782
)


Transaction costs related to equity method investment
 
 
(525
)
 
 
—
 


Proceeds from sale of intangible assets
 
 
77,525
 
 
 
4,250
 


Net cash provided by investing activities
 
 
75,540
 
 
 
1,468
 


Financing activities
 
 
 
 
 
 


Proceeds from borrowings under the Revolving Credit Facilities
 
 
245,116
 
 
 
402,652
 


Repayment of borrowings under the Revolving Credit Facilities
 
 
(289,387
)
 
 
(378,778
)


Repayment of borrowings under the Term Loan Facilities
 
 
(29,378
)
 
 
(5,622
)


Proceeds from common stock issuance, net of certain fees
 
 
—
 
 
 
825
 


Tax withholdings related to restricted stock vesting
 
 
(142
)
 
 
(213
)


Proceeds from stock option exercises, restricted stock vesting, and issuance of common stock under employee stock purchase plan
 
 
48
 
 
 
75
 


Financing fees
 
 
(3,336
)
 
 
(1,128
)


Net cash (used in) provided by financing activities
 
 
(77,079
)
 
 
17,811
 


Increase in cash, cash equivalents, and restricted cash
 
 
101
 
 
 
18
 


Effect of exchange rate changes on cash, cash equivalents, and restricted cash
 
 
2
 
 
 
2
 


Cash, cash equivalents, and restricted cash, beginning of period
 
 
1,116
 
 
 
1,096
 


Cash, cash equivalents, and restricted cash, end of period
 
 
1,219
 
 
 
1,116
 


Less: restricted cash at end of period
 
 
862
 
 
 
37
 


Cash and cash equivalents per balance sheet at end of period
 
$
357
 
 
$
1,079
 


 
 
 
 
 
 
 


Supplemental Disclosures of Cash Flow Information
 
 
 
 
 
 


Cash payments for interest
 
$
6,400
 
 
$
3,352
 


Cash payments for income taxes, net of refunds
 
 
752
 
 
 
165
 


Supplemental Disclosures of Non-Cash Investing and Financing Activities
 
 
 
 
 
 


Non-cash equity method investment
 
 
25,500
 
 
 
—
 


Capital expenditures in accounts payable and accrued liabilities
 
 
117
 
 
 
19
 


Deferred financing fees in accrued liabilities
 
 
1
 
 
 
1,050
 


See accompanying notes to Consolidated Financial Statements.
F-7

 
 VINCE HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data and share amounts)
Note 1. Description of Business and Summary of Significant Accounting Policies(A) Description of Business: The Company is a global retail company that operates the Vince brand women's and men's ready to wear business. Vince, established in 2002, is a leading global luxury apparel and accessories brand best known for creating elevated yet understated pieces for every day effortless style. Previously, the Company also owned and operated the Rebecca Taylor and Parker brands until the sale of the respective intellectual property was completed, as discussed below. On April 21, 2023 the Company entered into a strategic partnership ("Authentic Transaction") with Authentic Brands Group, LLC ("Authentic"), a global brand development, marketing and entertainment platform, whereby the Company contributed its intellectual property to a newly formed Authentic subsidiary ("ABG Vince") for cash consideration and a membership interest in ABG Vince. The Company closed the Asset Sale (as defined below) on May 25, 2023. On May 25, 2023, in connection with the Authentic Transaction, Vince, LLC entered into a License Agreement (the "License Agreement") with ABG-Vince LLC, which provides Vince, LLC with an exclusive, long-term license to use the Licensed Property in the Territory to the Approved Accounts (each as defined in the License Agreement). See Note 2 "Recent Transactions" for additional information. Rebecca Taylor, founded in 1996 in New York City, was a contemporary womenswear line lauded for its signature prints, romantic detailing and vintage inspired aesthetic, reimagined for a modern era. On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" for further information. Parker, founded in 2008 in New York City, was a contemporary women's fashion brand that was trend focused. During the first half of fiscal 2020 the Company decided to pause the creation of new products for the Parker brand to focus resources on the operations of the Vince and Rebecca Taylor brands. On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. See Note 2 "Recent Transactions" for additional information. The Company reaches its customers through a variety of channels, specifically through major wholesale department stores and specialty stores in the United States ("U.S.") and select international markets, as well as through the Company's branded retail locations and the Company's websites. The Company designs products in the U.S. and sources the vast majority of products from contract manufacturers outside the U.S., primarily in Asia. Products are manufactured to meet the Company's product specifications and labor standards. (B) Basis of Presentation: The accompanying consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC").The consolidated financial statements include the Company's accounts and the accounts of the Company's wholly-owned subsidiaries as of February 3, 2024. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the financial statements contain all adjustments (consisting solely of normal recurring adjustments) and disclosures necessary for a fair presentation. (C) Fiscal Year: The Company operates on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52 or 53-week period ending on the Saturday closest to January 31.•References to "fiscal year 2023" or "fiscal 2023" refer to the fiscal year ended February 3, 2024; and•References to "fiscal year 2022" or "fiscal 2022" refer to the fiscal year ended January 28, 2023.Fiscal year 2023 consisted of a 53-week period and 2022 consisted of a 52-week period.(D) Sources and Uses of Liquidity: The Company's sources of liquidity are cash and cash equivalents, cash flows from operations, if any, borrowings available under the 2023 Revolving Credit Facility (as defined in Note 5 "Long-Term Debt and Financing Arrangements") and the Company's ability to access the capital markets, including the Sales Agreement entered into with Virtu Americas LLC in June 2023 (see Note 9 "Stockholders' Equity" for further information). The Company's primary cash needs are funding working capital requirements, including royalty payments under the License Agreement, meeting debt service requirements and capital expenditures for new stores and related leasehold improvements. The most significant components of the Company's working capital are cash and cash equivalents, accounts receivable, inventories, accounts payable and other current liabilities. Based F-8
 on our current expectations, we believe that our sources of liquidity will generate sufficient cash flows to meet our obligations during the next twelve months from the date these financial statements are issued.(E) Use of Estimates: The preparation of consolidated financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements which affect revenues and expenses during the period reported. Estimates are adjusted when necessary to reflect actual experience. Significant estimates and assumptions may affect many items in the financial statements. Actual results could differ from estimates and assumptions in amounts that may be material to the consolidated financial statements.(F) Cash and cash equivalents: All demand deposits and highly liquid short-term deposits with original maturities of three months or less are considered cash equivalents. (G) Accounts Receivable and Concentration of Credit Risk: The Company maintains an allowance for accounts receivable estimated to be uncollectible. The adjustments to the provision are recorded in Selling, general and administrative ("SG&A") expense. Substantially all of the Company's trade receivables are derived from sales to retailers and are recorded at the invoiced amount and do not bear interest. The Company performs ongoing credit evaluations of its wholesale partners' financial condition and requires collateral as deemed necessary. The past due status of a receivable is based on its contractual terms. Account balances are charged off against the allowance when it is probable the receivable will not be collected.Accounts receivable are recorded net of allowances including expected future chargebacks from wholesale partners and estimated margin support. It is the nature of the apparel and fashion industry that suppliers similar to the Company face significant pressure from customers in the retail industry to provide allowances to compensate for wholesale partner margin shortfalls. This pressure often takes the form of customers requiring the Company to provide price concessions on prior shipments as a prerequisite for obtaining future orders. Pressure for these concessions is largely determined by overall retail sales performance and, more specifically, the performance of the Company's products at retail. To the extent the Company's wholesale partners have more of the Company's goods on hand at the end of the season, there will be greater pressure for the Company to grant markdown concessions on prior shipments. Accounts receivable balances are reported net of expected allowances for these matters based on the historical level of concessions required and estimates of the level of markdowns and allowances that will be required in the coming season. The Company evaluates the allowance balances on a continual basis and adjusts them as necessary to reflect changes in anticipated allowance activity. The Company also provides an allowance for sales returns based on known trends and historical return rates.In fiscal 2023 and 2022, sales to one wholesale partner accounted for more than ten percent of the Company's net sales. Sales to this partner represented 20% of fiscal 2023 net sales and 16% of fiscal 2022 net sales. A wholesale partner represented greater than ten percent of the Company's gross accounts receivable balances as of February 3, 2024 and January 28, 2023, with 36% and 39% of such balances, respectively. In addition, another wholesale partner represented greater than ten percent of the Company's gross accounts receivable balance as of February 3, 2024, with 22% of such balance. (H) Inventories: Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out basis. The cost of inventory includes purchase cost as well as sourcing, transportation, duty, and other processing costs associated with acquiring, importing, and preparing inventory for sale. Inventory costs are included in cost of products sold at the time of their sale. Product development costs are expensed in SG&A expense when incurred. Inventory values are reduced to net realizable value when there are factors indicating that certain inventories will not be sold on terms sufficient to recover their cost. Inventories consisted of finished goods. As of February 3, 2024 and January 28, 2023 finished goods, net of reserves were $58,777 and $90,008, respectively. The Company has two major suppliers that accounted for approximately 18% and 17%, respectively, of inventory purchases for fiscal 2023 and approximately 19% and 18%, respectively, of inventory purchases for fiscal 2022. Amounts due to these suppliers were $1,509 as of February 3, 2024 and $7,097 as of January 28, 2023, and were included in Accounts payable in the Consolidated Balance Sheets.(I) Property and Equipment: Property and equipment are stated at cost. Depreciation is computed on the straight-line method over estimated useful lives of three to ten years for furniture, fixtures, and equipment. Leasehold improvements are depreciated on the straight-line basis over the shorter of their estimated useful lives or the lease term, excluding renewal terms. Capitalized software is depreciated on the straight-line basis over the estimated economic useful life of the software, generally three to seven years. Maintenance and repair costs are charged to earnings while expenditures for major renewals and improvements are capitalized. Upon F-9
 the disposition of property and equipment, the accumulated depreciation is deducted from the original cost and any gain or loss is reflected in current earnings. Property and equipment consisted of the following: 













 
 
February 3,
 
 
January 28,
 


(in thousands)
 
2024
 
 
2023
 


Leasehold improvements
 
$
32,694
 
 
$
36,063
 


Furniture, fixtures and equipment
 
 
9,748
 
 
 
10,897
 


Capitalized software
 
 
14,775
 
 
 
14,570
 


Construction in process
 
 
585
 
 
 
144
 


Total property and equipment
 
 
57,802
 
 
 
61,674
 


Less: accumulated depreciation
 
 
(50,830
)
 
 
(51,195
)


Property and equipment, net
 
$
6,972
 
 
$
10,479
 

Depreciation expense was $4,692 and $7,104 for fiscal 2023 and fiscal 2022, respectively. (J) Impairment of Long-lived Assets: The Company reviews long-lived assets which consist of property and equipment and operating lease assets when the existence of facts and circumstances indicate that the useful life is shorter than previously estimated or that the carrying amount of the asset groups to which these assets relate may not be recoverable. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores is at the store level. Recoverability of these assets is evaluated by comparing the carrying value of the asset group with its estimated future undiscounted cash flows. The recoverability assessment is dependent on a number of factors, including estimates of future growth and profitability, as well as other variables. If the comparisons indicate that the value of the asset is not recoverable, an impairment loss is calculated as the difference between the carrying value and the fair value of the assets within the asset group and the loss is recognized during that period. The fair value of the operating lease right-of-use assets is determined from the perspective of a market participant considering various factors. The judgments and assumptions used in determining the fair value of the operating lease right-of-use assets were the current comparable market rents for similar properties and a store discount rate. The fair value of the property and equipment was based on its estimated liquidation value. The estimates regarding recoverability and fair value can be affected by factors such as future store results, real estate demand, store closure plans, and economic conditions that can be difficult to predict.During fiscal 2022, the Company recorded non-cash asset impairment charges of $1,880, within Impairment of long-lived assets on the Consolidated Statements of Operations and Comprehensive Income (Loss), related to the impairment of property and equipment for certain Vince and Rebecca Taylor retail locations as the carrying values were determined not to be recoverable. The carrying amounts of these assets were adjusted to their estimated fair values.  There were no impairment charges during fiscal 2023.(K) Goodwill and Other Intangible Assets: Goodwill and other indefinite-lived intangible assets are tested for impairment at least annually and in an interim period if a triggering event occurs. Goodwill is not allocated to the Company's operating segments in the measure of segment assets regularly reported to and used by management; however, goodwill is allocated to operating segments (goodwill reporting units) for the purpose of the annual impairment test for goodwill.Goodwill represents the excess of the cost of acquired businesses over the fair market value of the identifiable net assets. As of January 28, 2023, the indefinite-lived intangible asset was the Vince tradename. On April 21, 2023, the Company entered into the Authentic Transaction with Authentic and as a result, the Vince tradename and Vince customer relationships were classified as held for sale and amortization of the Vince customer relationships ceased. The Company closed the Asset Sale on May 25, 2023. See Note 2 "Recent Transactions" for further information.On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. Therefore, the Company determined that the indefinite life classification was no longer appropriate for the Rebecca Taylor tradename and began amortizing the Rebecca Taylor tradename in the third quarter of fiscal 2022. Amortization of the Rebecca Taylor tradename ceased upon classification as held for sale in the third quarter of fiscal 2022. On December 22, 2022, the Company completed the sale of the Rebecca Taylor tradename and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" for further information. Additionally, during the third quarter of fiscal 2022, the Parker tradename was classified as held for sale and amortization ceased. As of January 28, 2023, Assets held for sale on the Consolidated Balance Sheets represented $260 related to the Parker tradename. Prior to its classification as held for sale, the Parker tradename intangible asset was being amortized on a straight-line basis over 10 years. On February 17, 2023, the Company completed the sale of the Parker tradename and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. See Note 2 "Recent Transactions" for further information.An entity may elect to perform a qualitative impairment assessment for goodwill and indefinite-lived intangible assets. If adverse qualitative trends are identified during the qualitative assessment that indicate that it is more likely than not that the fair value F-10
 of a reporting unit or indefinite-lived intangible asset is less than its carrying amount, a quantitative impairment test is required. "Step one" of the quantitative impairment test for goodwill requires an entity to determine the fair value of each reporting unit and compare such fair value to the respective carrying amount. If the estimated fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recorded for the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The goodwill impairment test is dependent on a number of factors, including estimates of projected revenues, EBITDA margins, long-term growth rates, working capital and discount rates. The Company bases its estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.Prior to the closing of the Asset Sale, the Company estimated the fair value of the tradename intangible assets using a discounted cash flow valuation analysis, which is based on the "relief from royalty" methodology. This methodology assumes that in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. The relief from royalty approach is dependent on a number of factors, including estimates of projected revenues, royalty rates in the category of intellectual property and discount rates. The Company based its fair value estimates on assumptions it believed to be reasonable, but which were unpredictable and inherently uncertain.  An impairment loss would have been recognized when the estimated fair value of the tradename intangible asset is less than the carrying value.  The Company closed the Asset Sale on May 25, 2023, and therefore no longer carries tradename intangible assets as of February 3, 2024.  Indefinite-lived tradename intangible assets were $67,100 as of January 28, 2023, which is included within Intangible assets, net in the Consolidated Balance Sheets.An entity may pass on performing the qualitative assessment for a reporting unit or indefinite-lived intangible asset and directly perform the quantitative assessment. This determination can be made on an asset by asset basis, and an entity may resume performing a qualitative assessment in subsequent periods.Determining the fair value of goodwill and other intangible assets is judgmental in nature and requires the use of significant estimates and assumptions, including projected revenues, EBITDA margins, long-term growth rates, working capital, royalty rates in the category of intellectual property, discount rates and future market conditions, among others. It is possible that estimates of future operating results could change adversely and impact the evaluation of the recoverability of the carrying value of goodwill and intangible assets and that the effect of such changes could be material.During the second quarter of fiscal 2022, the Company determined that a triggering event had occurred in the Rebecca Taylor and Parker segment as a result of changes to the Company's long-term projections. The Company performed an interim quantitative impairment assessment of the Rebecca Taylor tradename utilizing the relief from royalty valuation approach. The Company estimated the fair value of the Rebecca Taylor tradename intangible asset and determined that the fair value of the Rebecca Taylor tradename was below its carrying amount. Accordingly, the Company recorded an impairment charge for the Rebecca Taylor tradename intangible asset of $1,700, which was recorded within Impairment of intangible assets on the Consolidated Statement of Operations and Comprehensive Income (Loss) in fiscal 2022.In both fiscal 2023 and fiscal 2022, the Company performed its annual impairment test during the fourth quarter. The fair value of the Company's Vince Wholesale reporting unit was estimated using a combination of the income approach (the discounted cash flows method) and the market approach (guideline public company method). In fiscal 2023, the Company elected to perform a quantitative impairment test on goodwill allocated to the Company's Vince Wholesale reporting unit. The results of the quantitative test did not result in any impairment because the fair value of the Company's Vince Wholesale reporting unit exceeded its carrying value. In fiscal 2022, the Company elected to perform a quantitative impairment test on goodwill allocated to the Company's Vince Wholesale reporting unit. The results of the quantitative test did not result in any impairment because the fair value of the Company's Vince Wholesale reporting unit exceeded its carrying value. Goodwill was $31,973 as of both February 3, 2024 and January 28, 2023. In the fourth quarter of fiscal 2022, the Company elected to perform a quantitative impairment test on its Vince tradename indefinite-lived intangible asset. The results of the quantitative test did not result in any impairment because the fair value of the Company's Vince tradename intangible asset exceeded its carrying value. The finite-lived intangible assets as of January 28, 2023 were comprised of Vince customer relationships which were being amortized on a straight-line basis over their useful lives of 20 years.See Note 3 "Goodwill and Intangible Assets" for more information on the details surrounding goodwill and intangible assets.(L) Deferred Financing Costs: Deferred financing costs, such as underwriting, financial advisory, professional fees, and other similar fees are capitalized and recognized in interest expense over the contractual life of the related debt instrument using the straight-line method, as this method results in recognition of interest expense that is materially consistent with that of the effective interest method.(M) Leases: The Company determines if a contract contains a lease at inception. The Company leases various office spaces, showrooms and retail stores. Although the Company's more recent leases are subject to shorter terms as a result of the implementation F-11
 of the strategy to pursue shorter lease terms, some of the Company's leases have initial terms of 10 years, and in many instances can be extended for an additional term. The Company will not include renewal options in the underlying lease term unless the Company is reasonably certain to exercise the renewal option. Substantially all of the Company's leases require a fixed annual rent, and most require the payment of additional rent if store sales exceed a negotiated amount. These percentage rent expenses are considered as variable lease costs and are recognized in the consolidated financial statements when incurred. In addition, the Company's real estate leases may also require additional payments for real estate taxes and other occupancy-related costs which it considers as non-lease components. Operating lease right-of-use ("ROU") assets and operating lease liabilities are recognized based upon the present value of the future lease payments over the lease term. As the Company's leases do not provide an implicit borrowing rate, the Company uses an estimated incremental borrowing rate based upon a combination of market-based factors, such as market quoted forward yield curves and company specific factors, such as the Company's credit rating, lease size and duration to calculate the present value. (N) Revenue Recognition: The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs upon the transfer of control in accordance with the contractual terms and conditions of the sale. Sales are recognized when the control of the goods are transferred to the customer for the Company's wholesale business, upon receipt by the customer for the Company's e-commerce business, and at the time of sale to the consumer for the Company's retail business. See Note 13 "Segment and Geographical Financial Information" for disaggregated revenue amounts by segment. Revenue associated with gift cards is recognized upon redemption and unredeemed balances are considered a contract liability and recorded within Other accrued expenses, which are subject to escheatment within the jurisdictions in which it operates. As of February 3, 2024 and January 28, 2023, the contract liability was $1,628 and $1,617, respectively. In fiscal 2023, the Company recognized $286 of revenue that was previously included in the contract liability as of January 28, 2023.Amounts billed to customers for shipping and handling costs are not material. Such shipping and handling costs are accounted for as a fulfillment cost and are included in cost of products sold. Sales taxes that are collected by the Company from a customer are excluded from revenue.Sales are measured as the amount of consideration the Company expects to receive in exchange for transferring goods, which includes estimates for variable consideration. Variable consideration mainly includes discounts, chargebacks, markdown allowances, cooperative advertising programs, and sales returns. Estimated amounts of discounts, chargebacks, markdown allowances, cooperative advertising programs, and sales returns are accounted for as reductions of sales when the associated sale occurs. These estimated amounts are adjusted periodically based on changes in facts and circumstances when the changes become known. On the Company's consolidated balance sheet, reserves for sales returns are included within other accrued liabilities, and the value of inventory associated with reserves for sales returns are included in prepaid expenses and other current assets. The Company continues to estimate the amount of sales returns based on known trends and historical return rates.(O) Cost of Products Sold: The Company's cost of products sold and gross margins may not necessarily be comparable to that of other entities as a result of different practices in categorizing costs. The primary components of the Company's cost of products sold are as follows:•the cost of purchased merchandise, including raw materials;•the cost of inbound transportation, including freight;•the cost of the Company's production and sourcing departments;•other processing costs associated with acquiring and preparing the inventory for sale; and•shrink and valuation reserves.(P) Marketing and Advertising: The Company provides cooperative advertising allowances to certain of its customers. These allowances are accounted for as reductions in sales as discussed in "Revenue Recognition" above. Production expense related to company-directed advertising is deferred until the first time at which the advertisement runs. All other expenses related to company-directed advertising are expensed as incurred. Marketing and advertising expense recorded in SG&A expenses was $11,843 and $15,339 in fiscal 2023 and fiscal 2022, respectively. At February 3, 2024 and January 28, 2023, deferred production expenses associated with company-directed advertising were $698 and $340, respectively.(Q) Share-Based Compensation: New, modified and unvested share-based payment transactions with employees, such as stock options and restricted stock units, are measured at fair value and recognized as compensation expense over the requisite service period and is included as a component of SG&A expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss). Forfeitures are accounted for as they occur.F-12
 (R) Income Taxes: The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities at enacted rates. The Company assesses the likelihood of the realization of deferred tax assets and adjusts the carrying amount of these deferred tax assets by a valuation allowance to the extent the Company believes it more likely than not that all or a portion of the deferred tax assets will not be realized. Many factors are considered when assessing the likelihood of future realization of deferred tax assets, including recent earnings results within taxing jurisdictions, expectations of future taxable income, the carryforward periods available and other relevant factors. Changes in the required valuation allowance are recorded in income in the period such determination is made. The Company recognizes tax positions in the Consolidated Balance Sheets as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with tax authorities assuming full knowledge of the position and all relevant facts. Accrued interest and penalties related to unrecognized tax benefits are included in income taxes in the Consolidated Statements of Operations and Comprehensive Income (Loss).(S) Earnings (Loss) Per Share: Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Except when the effect would be anti-dilutive, diluted earnings per share is calculated based on the weighted average number of shares of common stock outstanding plus the dilutive effect of share-based awards calculated under the treasury stock method.(T) Recent Accounting Pronouncements: Except as noted below, the Company has considered all recent accounting pronouncements and has concluded that there are no recent accounting pronouncements that may have a material impact on its Consolidated Financial Statements, based on current information.Recently Adopted Accounting PronouncementsIn June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13: "Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". The ASU requires an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. The new standard applies to trade receivables arising from revenue transactions. Under Accounting Standards Codification 606, revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. The Company adopted the guidance on January 29, 2023, the first day of fiscal 2023, which did not have a material effect on the Company's consolidated financial statements.Recently Issued Accounting PronouncementsIn November 2023, the FASB issued ASU 2023-07: Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment.  The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.  The amendments should be applied retrospectively to all prior periods presented in the financial statements.  Other than additional disclosure, we do not expect a change to our consolidated statements of operations, financial position, or cash flows as a result of this ASU.In December 2023, the FASB issued ASU 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires expanded disclosure within the rate reconciliation as well as disaggregation of annual taxes paid. This amendment is effective for annual periods beginning after December 15, 2023, and is applied prospectively.  Early adoption is permitted. The Company is currently evaluating the impact that this new guidance may have on its financial statement disclosures.In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275: The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires new disclosures regarding information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition. In addition, certain disclosures related to severe weather events and other natural conditions will also be required in a registrant’s audited financial statements. Based on our smaller reporting company and non-accelerated filer status, certain disclosures are effective for fiscal years beginning after December 15, 2026, with certain remaining disclosures effective for fiscal years beginning after December 15, 2027. As a smaller reporting company, we are exempt from emissions disclosures and related assurance requirements. We will evaluate the SEC rule to determine its impact on our future financial reporting requirements and related disclosures.
 
F-13

 
 
Note 2. Recent Transactions Wind Down of Rebecca Taylor BusinessOn September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On September 30, 2022, the Company entered into amendments to the Term Loan Credit Facility, the 2018 Revolving Credit Facility and the Third Lien Credit Facility (see Note 5 "Long-Term Debt and Financing Arrangements"), which in part, permitted the sale of the intellectual property of the Rebecca Taylor, Inc. and the Rebecca Taylor, Inc. liquidation.On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group for $4,250. The Company recognized a gain of $1,620 on the sale, which was recorded within Gain on sale of intangible assets in the Consolidated Statements of Operations and Comprehensive Income (Loss). Net cash proceeds from the sale were used to repay $2,997 of borrowings under the Term Loan Credit Facility and $427 of borrowings under the 2018 Revolving Credit Facility, during fiscal 2022.On July 7, 2023, Rebecca Taylor, Inc. and Rebecca Taylor Retail Stores, LLC, each as an assignor, made a General Assignment for the Benefit of the Creditors (the "Assignment") to a respective assignee, an unaffiliated California limited liability company, pursuant to California state law. The Assignment resulted in the residual rights and assets of each of Rebecca Taylor, Inc. and Rebecca	Taylor Retail Stores, LLC being assigned and transferred to such assignees. As a result, Rebecca Taylor, Inc. and Rebecca Taylor Retail Stores, LLC no longer hold any assets.The following table presents a summary of Rebecca Taylor wind down related charges (benefits), reported within the Rebecca Taylor and Parker segment, incurred for fiscal 2023 and fiscal 2022: 













 
 
Fiscal Year
 


(in thousands)
 
2023
 
 
2022
 


Net Sales:
 
 
 
 
 
 


Release of sales allowances
 
$
—
 
 
$
(227
)


Cost of products sold:
 
 
 
 
 
 


Inventory write-down
 
 
—
 
 
 
7,295
 


Selling, general and administrative expenses:
 
 
 
 
 
 


Operating lease right-of-use asset accelerated amortization
 
 
—
 
 
 
4,090
 


Benefit from release of operating lease liabilities
 
 
(2,025
)
 
 
(1,987
)


Accelerated depreciation and amortization
 
 
—
 
 
 
1,927
 


Employee termination costs, net (1)
 
 
—
 
 
 
556
 


Other advisory and liquidation costs
 
 
275
 
 
 
3,141
 


Total selling, general and administrative expenses
 
 
(1,750
)
 
 
7,727
 


Total wind-down (benefits) charges, net
 
$
(1,750
)
 
$
14,795
 

 (1) Employee termination costs, net are primarily related to severance and were recorded within Other accrued expenses on the Consolidated Balance Sheets. Substantially all severance costs were paid by the end of fiscal 2022.Sale of Parker Intellectual Property On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands, for $1,025. The Company recognized a gain of $765 on the sale, which was recorded within Gain on sale of intangible assets in the Consolidated Statements of Operations and Comprehensive Income (Loss) for fiscal 2023. Net cash proceeds from the sale were used to repay $838 of borrowings under the Term Loan Credit Facility (as defined in Note 5 "Long-Term Debt and Financing Arrangements"). Sale of Vince Intellectual Property On April 21, 2023 the Company entered into the Asset Purchase Agreement (defined below), pursuant to which Vince, LLC agreed to sell and transfer to ABG-Vince LLC (f/k/a ABG-Viking, LLC) ("ABG Vince"), an indirect subsidiary of Authentic, all intellectual property assets related to the business operated under the Vince brand in exchange for total consideration of $76,500 in cash and a 25% membership interest in ABG Vince (the "Asset Sale"). The Asset Sale was consummated in accordance with the terms of the Asset Purchase Agreement on May 25, 2023 (the "Closing Date"). Through the agreement, Authentic will own the majority stake of 75% membership interest in ABG Vince. F-14
 Upon the closing of the Asset Sale, the Company derecognized the intellectual property assets at their carrying amount of $69,957. In exchange for the Company's sale of its intellectual property assets, which included the Vince tradename and Vince customer relationships, to ABG Vince, Authentic paid $76,500 in cash and a 25% interest in ABG Vince valued at $25,500. As a result, the Company recognized a gain of $32,043, which was recorded within Gain on sale of intangible assets in the Consolidated Statements of Operations and Comprehensive Income (Loss) during fiscal 2023. Additionally, during fiscal 2023, the Company incurred total transaction related costs of approximately $5,555. Of these transaction costs, approximately $525 was incurred to acquire the investment in ABG Vince.  As such, these costs were included in the initial measurement of the investment and recorded as part of the equity method investment on the Consolidated Balance Sheets. The remaining transaction related costs are included in selling, general and administrative ("SG&A") expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).  The Company utilized the net proceeds received to prepay in full the Term Loan Credit Facility and to repay a portion of the outstanding borrowings under the 2018 Revolving Credit Facility (as defined in Note 5 "Long-Term Debt and Financing Arrangements").  See Note 5 "Long-Term Debt and Financing Arrangements" for further information. Operating Agreement On May 25, 2023, in connection with the closing (the "Closing") of the Asset Sale pursuant to the Intellectual Property Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as of April 21, 2023, by and among Vince, LLC, ABG Vince, the Company and ABG Intermediate Holdings 2 LLC, Vince, LLC and ABG Vince entered into an Amended and Restated Limited Liability Company Agreement of ABG-Vince, LLC (the "Operating Agreement"), which, among other things, provides for the management of the business and the affairs of ABG Vince, the allocation of profits and losses, the distribution of cash of ABG Vince among its members and the rights, obligations and interests of the members to each other and to Vince, LLC.The Company accounts for its 25% interest in ABG Vince under the equity method. In applying the equity method, the Company recorded the initial investment at cost and subsequently increases or decreases the carrying amount of the investment by the Company's proportionate share of net income or loss. Distributions received from ABG Vince are recognized as a reduction of the carrying amount of the investment. The Company's proportionate share of ABG Vince's net income or loss is recorded within Equity in net income of equity method investment on the Consolidated Statements of Operations and Comprehensive Income (Loss). The carrying value for the Company's investment in ABG Vince is recorded within Equity method investment on the Consolidated Balance Sheets. The Company records its share of net income or loss using a one-month lag. This convention does not materially impact the Company's results. The Company reviews its investment in ABG Vince for impairment when events or changes in circumstances indicate that an other-than-temporary decline in value may have occurred.  If the carrying value of the investment exceeds its fair value and the loss in value is other than temporary, the investment is considered impaired and reduced to fair value, and the impairment is recognized in the period identified. Factors providing evidence of such a loss include changes in ABG Vince's operations or financial condition, significant continuing losses, and significant negative economic conditions, among others. License Agreement On May 25, 2023, in connection with the Closing, Vince, LLC and ABG Vince entered into a License Agreement (the "License Agreement"), which provides Vince, LLC with a license to use the Licensed Property in the Territory, which is defined as the United States, Canada, Andorra, Austria, Germany, Switzerland, Belgium, Netherlands, Luxembourg, France, Monaco, Liechtenstein, Italy, San Marino, Vatican City, Iceland, Norway, Denmark, Sweden, Finland, Spain, Portugal, Greece, Republic of Cyprus (excluding Northern Cyprus), United Kingdom, Ireland, Australia, New Zealand, Mainland China, Hong Kong, Macau, Taiwan, Singapore, Japan and Korea (the "Core Territory"), together with all other territories (the "Option Territory"), to the Approved Accounts (each as defined in the License Agreement). Vince, LLC is required to operate and maintain a minimum of 45 Retail Stores and Shop-in-Shops in the Territory. The Option Territory may be changed unilaterally by ABG Vince at any time after the effective date of the License Agreement. Additionally, the License Agreement provides Vince, LLC with a license to use the Licensed Property to design, manufacture, promote, market, distribute, and sell ready-to-wear Sportswear Products and Outerwear Products (the "Core Products") and Home Décor and Baby Layettes (the "Option Products," together with the Core Products, the "Licensed Products"), which Option Products may be changed unilaterally by ABG Vince at any time after the effective date of the License Agreement. The initial term of the License Agreement began on May 25, 2023, the date on which the Closing actually occurred, and ends at the end of the Company's 2032 fiscal year, unless sooner terminated pursuant to the terms of the License Agreement. Vince, LLC has the option to renew the License Agreement on the terms set forth in the License Agreement for eight consecutive periods of ten years each, unless the License Agreement is sooner terminated pursuant to its terms or Vince, LLC is in material breach of the License Agreement and such breach has not been cured within the specified cure period. Vince, LLC may elect not to renew the term for a renewal term. F-15
 Vince, LLC is required to pay ABG Vince a royalty on net sales of Licensed Products and committed to an annual guaranteed minimum royalty of $11,000 and annual minimum net sales as specified in the License Agreement, in each case, during the initial term of the License Agreement, except that the guaranteed minimum royalty and minimum net sales for the first contract year during the initial term will be prorated to the period beginning on the Closing Date and ending at the end of the Company's 2023 fiscal year. The annual guaranteed minimum royalty and annual minimum net sales for each subsequent renewal term will be the greater of (i) a percentage as set forth in the License Agreement of the guaranteed minimum net royalty or the minimum net sales (as applicable) of the immediately preceding contract year, and (ii) the average of actual Royalties (as defined in the License Agreement, with respect to the guaranteed minimum royalty) or actual Net Sales (as defined in the License Agreement, with respect to the annual minimum net sales) during certain years as set forth in the License Agreement of the preceding initial term or renewal term (as applicable). Vince, LLC is required to pay royalties comprised of a low single digit percentage of net sales arising from retail and e-commerce sales of Licensed Products and a mid single digit percentage of net sales arising from wholesale sales of such Licensed Products. In the event that the annual guaranteed minimum royalty paid to ABG Vince in any given contract year is greater than the actual royalties earned by ABG Vince in the same contract year, the difference between the royalty actually earned and the annual guaranteed minimum royalty paid is credited for the next two contract years against any amount of royalty earned by ABG Vince in excess of the annual guaranteed minimum royalty paid during each such contract year, if any. Royalty expense is included within Cost of product sold on the Consolidated Statements of Operations and Comprehensive Income (Loss).
 
 
 
 
Note 3. Goodwill and Intangible AssetsNet goodwill balances and changes therein by segment were as follows:  





















(in thousands)
 
Vince Wholesale
 
 
Vince Direct-to-consumer
 
 
Rebecca Taylor and Parker
 
 
Total Net Goodwill
 


Balance as of January 28, 2023
 
$
31,973
 
 
$
—
 
 
$
—
 
 
$
31,973
 


Balance as of February 3, 2024
 
$
31,973
 
 
$
—
 
 
$
—
 
 
$
31,973
 

The total carrying amount of goodwill was net of accumulated impairments of $101,845 as of both February 3, 2024 and January 28, 2023. There were no impairments recorded as a result of the Company's annual goodwill impairment test performed during fiscal 2023 and fiscal 2022.On April 21, 2023, the Company entered into the Authentic Transaction with Authentic and as a result, the Vince tradename and Vince customer relationships were classified as held for sale and amortization of the Vince customer relationships ceased. The Company closed the Asset Sale on May 25, 2023. See Note 2 "Recent Transactions" for further information.On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. See Note 2 "Recent Transactions" for further information.The following tables present a summary of identifiable intangible assets as of January 28, 2023: 

























(in thousands)
 
Gross Amount
 
 
Accumulated Amortization
 
 
Accumulated Impairments
 
 
Reclassification to Assets Held for Sale
 
 
Net Book Value
 


Balance as of January 28, 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Amortizable intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Customer relationships
 
$
31,355
 
 
$
(22,234
)
 
$
(6,115
)
 
$
—
 
 
$
3,006
 


Tradenames (1)
 
 
13,100
 
 
 
(313
)
 
 
(12,527
)
 
 
(260
)
 
 
—
 


Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Tradenames
 
 
101,850
 
 
 
—
 
 
 
(34,750
)
 
 
—
 
 
 
67,100
 


Total intangible assets
 
$
146,305
 
 
$
(22,547
)
 
$
(53,392
)
 
$
(260
)
 
$
70,106
 

 F-16
 (1) During the third quarter of fiscal 2022, the Parker tradename was classified as held for sale and amortization ceased. During the second quarter of fiscal 2022, the Company determined that a triggering event had occurred in the Rebecca Taylor and Parker segment as a result of changes to the Company's long-term projections. The Company performed an interim quantitative impairment assessment of the Rebecca Taylor tradename utilizing the relief from royalty valuation approach. The relief from royalty valuation approach is dependent on a number of factors, including estimates of projected revenues, royalty rates in the category of intellectual property, discount rates and other variables. The Company estimated the fair value of the Rebecca Taylor tradename intangible asset and determined that the fair value of the Rebecca Taylor tradename was below its carrying amount. Accordingly, the Company recorded an impairment charge for the Rebecca Taylor tradename intangible asset of $1,700, which was recorded within Impairment of intangible assets on the Consolidated Statements of Operations and Comprehensive Income (Loss) for fiscal 2022.  There were no such impairment charges for fiscal 2023.On December 22, 2022, the Company completed the sale of the Rebecca Taylor tradename and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" for further information.Amortization of identifiable intangible assets was $149 and $1,139 for fiscal 2023 and fiscal 2022, respectively, which is included in SG&A expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss).  
Note 4. Fair Value MeasurementsWe define the fair value of a financial instrument as the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are responsible for the determination of the value of the investments carried at fair value and the supporting methodologies and assumptions. The Company's financial assets and liabilities are to be measured using inputs from three levels of the fair value hierarchy as follows: 








 
Level 1—
 
quoted market prices in active markets for identical assets or liabilities


 
 
 


 
Level 2—
 
observable market-based inputs (quoted prices for similar assets and liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active) or inputs that are corroborated by observable market data


 
 
 


 
Level 3—
 
significant unobservable inputs that reflect the Company's assumptions and are not substantially supported by market data

The Company did not have any non-financial assets or non-financial liabilities recognized at fair value on a recurring basis at February 3, 2024 or January 28, 2023. At February 3, 2024 and January 28, 2023, the Company believes that the carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value, due to the short-term maturity of these instruments. The Company's debt obligations with a carrying value of $44,209 and $113,832 as of February 3, 2024 and January 28, 2023, respectively, are at variable interest rates. Borrowings under the Company's 2023 Revolving Credit Facility are recorded at carrying value, which approximates fair value due to the frequent nature of such borrowings and repayments. The Company considers this as a Level 2 input. The carrying values of the Company's Third Lien Credit Facility as of February 3, 2024 and January 28, 2023 approximate fair value, due to the variable rates associated with this obligation. The Company considers this a Level 3 input. The Company's non-financial assets, which primarily consist of goodwill, the previous intangible assets, operating lease right-of-use ("ROU") assets, and property and equipment, are not required to be measured at fair value on a recurring basis and are reported at their carrying values. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial assets are assessed for impairment and, if applicable, written down to (and recorded at) fair value. Determining the fair value of goodwill and other intangible assets is judgmental in nature and requires the use of significant estimates and assumptions, including projected revenues, EBITDA margins, long-term growth rates, working capital, royalty rates in the category of intellectual property, discount rates and future market conditions, among others, as applicable. The inputs used in determining the fair value of the ROU assets are the current comparable market rents for similar properties and a store discount rate. The fair value of the property and equipment is based on its estimated liquidation value. The measurement of fair value of these assets are considered Level 3 valuations as certain of these inputs are unobservable and are estimated to be those that would be used by market participants in valuing these or similar assets.F-17
 The following table presents the non-financial assets the Company measured at fair value on a non-recurring basis in fiscal 2022, based on such fair value hierarchy.  


























 
 
Net Carrying Value ofImpaired Assets as of
 
 
Fair Value Measured and Recorded at Reporting Date Using:
 
 
Total Losses - Year Ended
 
 


(in thousands)
 
January 28, 2023
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
January 28, 2023
 
 


Property and equipment
 
$
—
 
 
$
—
 
 
$
—
 
 
$
—
 
 
$
1,880
 
(1)


Rebecca Taylor Tradename
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
1,700
 
(2)

 (1) Recorded within Impairment of long-lived assets on the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 1 "Description of Business and Summary of Significant Accounting Policies – (J) Impairment of Long-lived Assets" for additional information.(2) Recorded within Impairment of intangible assets on the Consolidated Statements of Operations and Comprehensive Income (Loss). On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 1 "Description of Business and Summary of Significant Accounting Policies – (K) Goodwill and Other Intangible Assets" and Note 2 "Recent Transactions" for additional information.
Note 5. Long-Term Debt and Financing ArrangementsDebt obligations consisted of the following: 













 
 
February 3,
 
 
January 28,
 


(in thousands)
 
2024
 
 
2023
 


Long-term debt:
 
 
 
 
 
 


Term Loan Facilities
 
$
—
 
 
$
29,378
 


Revolving Credit Facilities
 
 
14,227
 
 
 
58,498
 


Third Lien Credit Facility
 
 
29,982
 
 
 
25,956
 


Total debt principal
 
 
44,209
 
 
 
113,832
 


Less: current portion of long-term debt
 
 
—
 
 
 
3,500
 


Less: deferred financing costs
 
 
259
 
 
 
2,254
 


Total long-term debt
 
$
43,950
 
 
$
108,078
 

Term Loan Credit FacilityOn September 7, 2021, Vince, LLC entered into a $35,000 senior secured term loan credit facility (the "Term Loan Credit Facility") pursuant to a Credit Agreement (the "Term Loan Credit Agreement"), as amended from time to time, by and among Vince, LLC, as the borrower, the guarantors named therein, PLC Agent, LLC, as administrative agent and collateral agent, and the other lenders from time to time party thereto. Vince Holding Corp. and Vince Intermediate Holding, LLC ("Vince Intermediate") were guarantors under the Term Loan Credit Facility. The Term Loan Credit Facility would have matured on the earlier of September 7, 2026, and 91 days after the maturity date of the 2018 Revolving Credit Facility. On May 25, 2023, utilizing proceeds from the Asset Sale, the Company repaid all outstanding amounts of $28,724, which included accrued interest and a prepayment penalty of $553 (which is included within financing fees on the Consolidated Statements of Cash Flows), under the Term Loan Credit Facility. The Term Loan Credit Facility was terminated. The Company also repaid $850 of fees due in accordance with an amendment entered into on September 30, 2022. Additionally, the Company recorded expense of $1,755 during fiscal 2023 related to the write-off of the remaining deferred financing costs. Prior to May 25, 2023, on an inception to date basis, the Company had made repayments of $7,335 on the Term Loan Credit Facility.F-18
 2023 Revolving Credit FacilityOn June 23, 2023, Vince, LLC, entered into a new $85,000 senior secured revolving credit facility (the "2023 Revolving Credit Facility") pursuant to a Credit Agreement (the "2023 Revolving Credit Agreement") by and among Vince, LLC, the guarantors named therein, Bank of America, N.A. ("BofA"), as Agent, the other lenders from time to time party thereto, and BofA Securities, Inc., as sole lead arranger and sole bookrunner. All outstanding amounts under the 2018 Revolving Credit Facility (as defined below) were repaid in full and such facility was terminated pursuant to the terms thereof as a result of all parties completing their obligations under such facility. The 2023 Revolving Credit Facility provides for a revolving line of credit of up to the lesser of (i) the Borrowing Base (as defined in the 2023 Revolving Credit Agreement) and (ii) $85,000, as well as a letter of credit sublimit of $10,000. The 2023 Revolving Credit Agreement also permits Vince, LLC to request an increase in aggregate commitments under the 2023 Revolving Credit Facility of up to $15,000, subject to customary terms and conditions. The 2023 Revolving Credit Facility matures on the earlier of June 23, 2028, and 91 days prior to the earliest maturity date of any Material Indebtedness (as defined in the 2023 Revolving Credit Agreement), including the subordinated indebtedness pursuant to the Third Lien Credit Agreement. Interest is payable on the loans under the 2023 Revolving Credit Facility, at Vince LLC's request, either at Term SOFR, the Base Rate, or SOFR Daily Floating Rate, in each case, with applicable margins subject to a pricing grid based on an average daily excess availability calculation. The "Base Rate" means, for any day, a fluctuating rate per annum equal to the highest of (i) the Federal Funds Rate for such day, plus 0.5%; (ii) the rate of interest in effect for such day as publicly announced from time to time by BofA as its prime rate; (iii) the SOFR Daily Floating Rate on such day, plus 1.0%; and (iv) 1.0%. During the continuance of certain specified events of default, at the election of BofA in its capacity as Agent, interest will accrue at a rate of 2.0% in excess of the applicable non-default rate. The applicable margins for SOFR Term and SOFR Daily Floating Rate Loans are: (i) 2.0% when the average daily Excess Availability (as defined in the 2023 Revolving Credit Agreement) is greater than 66.7% of the Loan Cap (as defined in the 2023 Revolving Credit Agreement); (ii) 2.25% when the average daily Excess Availability is greater than or equal to 33.3% but less than or equal to 66.7% of the Loan Cap; and (iii) 2.5% when the average daily Excess Availability is less than 33.3% of the Loan Cap. The applicable margins for Base Rate Loans are: (a) 1.0% when the average daily Excess Availability is greater than 66.7% of the Loan Cap; (b) 1.25% when the average daily Excess Availability is greater than or equal to 33.3% but less than or equal to 66.7% of the Loan Cap; and (c) 1.5% when the average daily Excess Availability is less than 33.3% of the Loan Cap. The 2023 Revolving Credit Facility contains a financial covenant requiring Excess Availability at all times to be no less than the greater of (i) 10.0% of the Loan Cap in effect at such time and (ii) $7,500. The 2023 Revolving Credit Facility contains representations and warranties, covenants and events of default that are customary for this type of financing, including limitations on the incurrence of additional indebtedness, liens, burdensome agreements, investments, loans, asset sales, mergers, acquisitions, prepayment of certain other debt, the repurchase of capital stock, transactions with affiliates, and the ability to change the nature of its business or its fiscal year. The 2023 Revolving Credit Facility generally permits dividends in the absence of any default or event of default (including any event of default arising from a contemplated dividend), so long as (i) after giving pro forma effect to the contemplated dividend and on a pro forma basis for the 30-day period immediately preceding such dividend, Excess Availability will be at least the greater of 20.0% of the Loan Cap and $15,000 and (ii) after giving pro forma effect to the contemplated dividend, the Consolidated Fixed Charge Coverage Ratio (as defined in the 2023 Revolving Credit Agreement) for the 12 months preceding such dividend will be greater than or equal to 1.0 to 1.0. All obligations under the 2023 Revolving Credit Facility are guaranteed by the Company and Vince Intermediate and any future subsidiaries of the Company (other than Excluded Subsidiaries as defined in the 2023 Revolving Credit Agreement) and secured by a lien on substantially all of the assets of the Company, Vince, LLC and Vince Intermediate and any future subsidiary guarantors, other than among others, equity interests in ABG Vince, as well as the rights of Vince, LLC under the License Agreement. The Company incurred a total of $1,150 of financing costs. In accordance with ASC Topic 470, "Debt", these financing costs were recorded as deferred debt issuance costs (which is presented within Other assets on the Consolidated Balance Sheets) and are amortized over the term of the 2023 Revolving Credit Facility. As of February 3, 2024, the Company was in compliance with applicable covenants. As of February 3, 2024, $35,473 was available under the 2023 Revolving Credit Facility, net of the Loan Cap, and there were $14,227 of borrowings outstanding and $5,053 of letters of credit outstanding under the 2023 Revolving Credit Facility. The weighted average interest rate for borrowings outstanding under the 2023 Revolving Credit Facility as of February 3, 2024 was 8.2%.    F-19
 2018 Revolving Credit Facility On August 21, 2018, Vince, LLC entered into an $80,000 senior secured revolving credit facility (the "2018 Revolving Credit Facility") pursuant to a credit agreement, as amended and restated from time to time, by and among Vince, LLC, as the borrower, VHC and Vince Intermediate, as guarantors, Citizens Bank, N.A. ("Citizens"), as administrative agent and collateral agent, and the other lenders from time to time party thereto. On January 31, 2023, the Company repaid $125 of fees due in accordance with an amendment entered into on September 30, 2022. Upon the contemporaneous consummation of the Asset Sale, the lenders' commitments to extend credit was reduced to $70,000. The 2018 Revolving Credit Facility would have matured on June 30, 2024. On June 23, 2023, all outstanding amounts under the 2018 Revolving Credit Facility were repaid in full and the 2018 Revolving Credit Facility was terminated pursuant to the terms thereof as a result of all parties completing their obligations under the 2018 Revolving Credit Facility. The Company recorded expense of $828 during fiscal 2023, related to the write-off of the remaining deferred financing costs. Certain letters of credit remain in place with Citizens which were secured with restricted cash, totaling $769 as of February 3, 2024.  Restricted cash is included in Prepaid Expenses and other current assets in the Consolidated Balance Sheets.Third Lien Credit FacilityOn December 11, 2020, Vince, LLC entered into a $20,000 subordinated term loan credit facility (the "Third Lien Credit Facility") pursuant to a credit agreement (the "Third Lien Credit Agreement"), as amended from time to time, dated December 11, 2020, by and among Vince, LLC, as the borrower, VHC and Vince Intermediate, as guarantors, and SK Financial Services, LLC ("SK Financial"), as administrative agent and collateral agent, and other lenders from time to time party thereto. The proceeds were received on December 11, 2020 and were used to repay a portion of the borrowings outstanding under the 2018 Revolving Credit Facility. SK Financial is an affiliate of Sun Capital Partners, Inc. ("Sun Capital"), whose affiliates own, as of February 3, 2024, approximately 68% of the Company's common stock. The Third Lien Credit Facility was reviewed and approved by the Special Committee of the Company's Board of Directors, consisting solely of directors not affiliated with Sun Capital, which committee was represented by independent legal advisors. Interest on loans under the Third Lien Credit Facility is payable in kind at a rate revised in connection with the Third Lien Third Amendment (as defined and discussed below) to be equal to the Daily Simple SOFR, subject to a credit spread adjustment of 0.10% per annum, plus 9.0%. During the continuance of certain specified events of default, interest may accrue on the loans under the Third Lien Credit Facility at a rate of 2.0% in excess of the rate otherwise applicable to such amount. The Company incurred $485 in deferred financing costs associated with the Third Lien Credit Facility of which a $400 closing fee is payable in kind and was added to the principal balance. These deferred financing costs are recorded as deferred debt issuance costs which will be amortized over the remaining term of the Third Lien Credit Facility. All obligations under the Third Lien Credit Facility are guaranteed by the Company, Vince Intermediate and the Company's existing material domestic restricted subsidiaries as well as any future material domestic restricted subsidiaries and are secured on a junior basis relative to the 2023 Revolving Credit Facility by a lien on substantially all of the assets of the Company, Vince Intermediate, Vince, LLC and the Company's existing material domestic restricted subsidiaries as well as any future material domestic restricted subsidiaries. On April 21, 2023, Vince, LLC entered into that certain Consent and Third Amendment to Credit Agreement (the "Third Lien Third Amendment"), which, among other things, (a) permitted the sale of the intellectual property of the Vince Business contemplated in the Asset Sale, (b) replaced LIBOR as an interest rate benchmark in favor of Daily Simple SOFR, subject to a credit spread adjustment of 0.10% per annum, plus 9.0% (c) amended the Third Lien Credit Agreement's maturity date to the earlier of (i) March 30, 2025 and (ii) 180 days after the maturity date under the 2018 Revolving Credit Facility, (d) reduced the capacity to incur indebtedness and liens, make investments, restricted payments and dispositions and repay certain indebtedness and (e) modified certain representations and warranties, covenants and events of default in respect of documentation related to the Asset Sale. The Third Lien Third Amendment became effective upon the consummation of the Asset Sale, the prepayment of the Term Loan Credit Facility in full and other transactions contemplated by the Asset Purchase Agreement. On June 23, 2023, Vince, LLC entered into the Fourth Amendment (the "Third Lien Fourth Amendment") to the Third Lien Credit Agreement which, among other things, (a) extended the Third Lien Credit Agreement's maturity date to the earlier of (i) September 30, 2028 and (ii) 91 days prior to the earliest maturity date of any Material Indebtedness (as defined therein) other than the 2023 Revolving Credit Facility and (b) modified certain representations and warranties, covenants and events of default in respect of documentation conforming to the terms of the 2023 Revolving Credit Facility.
F-20

 
Note 6. Commitments and ContingenciesContractual Cash ObligationsAt February 3, 2024, the Company had contractual cash obligations of $145,861 which consisted primarily of Guaranteed Minimum Royalty payments (as described below), inventory purchase obligations and service contracts. On May 25, 2023, in connection with the Closing, Vince, LLC and ABG Vince entered into the License Agreement. The initial term of the License Agreement began on May 25, 2023, the date on which the Closing actually occurred, and ends at the end of the Company's 2032 fiscal year, unless sooner terminated pursuant to the terms of the License Agreement. Vince, LLC is required to pay ABG Vince a royalty on net sales of Licensed Products and committed to an annual guaranteed minimum royalty of $11,000 during the initial term of the License Agreement, except that the guaranteed minimum royalty for the first contract year during the initial term will be prorated to the period beginning on the Closing Date and ending at the end of the Company's 2023 fiscal year. See Note 2  "Recent Transactions" for further information. In addition, see Note 12 "Leases" for a summary of the Company's future minimum rental payments under non-cancelable leases. LitigationThe Company is a party to legal proceedings, compliance matters, environmental, as well as wage and hour and other labor claims that arise in the ordinary course of business. Although the outcome of such items cannot be determined with certainty, management believes that the ultimate outcome of these items, individually and in the aggregate, will not have a material adverse impact on the Company's financial position, results of operations or cash flows.
Note 7. Share-Based CompensationEmployee Stock PlansVince 2013 Incentive PlanIn connection with the IPO, the Company adopted the Vince 2013 Incentive Plan, which provides for grants of stock options, stock appreciation rights, restricted stock, and other stock-based awards. In May 2018, the Company filed a Registration Statement on Form S-8 to register an additional 660,000 shares of common stock available for issuance under the Vince 2013 Incentive Plan. Additionally, in September 2020, the Company filed a Registration Statement on Form S-8 to register an additional 1,000,000 shares of common stock available for issuance under the Vince 2013 Incentive Plan. The aggregate number of shares of common stock which may be issued or used for reference purposes under the Vince 2013 Incentive Plan or with respect to which awards may be granted may not exceed 2,000,000 shares. The shares available for issuance under the Vince 2013 Incentive Plan may be, in whole or in part, either authorized and unissued shares of the Company's common stock or shares of common stock held in or acquired for the Company's treasury. In general, if awards under the Vince 2013 Incentive Plan are canceled for any reason, or expire or terminate unexercised, the shares covered by such award may again be available for the grant of awards under the Vince 2013 Incentive Plan. As of February 3, 2024, there were 804,519 shares under the Vince 2013 Incentive Plan available for future grants. Options granted pursuant to the Vince 2013 Incentive Plan typically vest in equal installments over four years, subject to the employees' continued employment and expire on the earlier of the tenth anniversary of the grant date or upon termination as outlined in the Vince 2013 Incentive Plan. Restricted stock units ("RSUs") granted vest in equal installments over a three-year period or vest in equal installments over four years, subject to the employees' continued employment. In November 2023, the Vince 2013 Incentive Plan was amended to, among others, extend the plan expiration date to November 2033. Employee Stock Purchase PlanThe Company maintains an employee stock purchase plan ("ESPP") for its employees. Under the ESPP, all eligible employees may contribute up to 10% of their base compensation, up to a maximum contribution of $10 per year. The purchase price of the stock is 90% of the fair market value, with purchases executed on a quarterly basis. The plan is defined as compensatory, and accordingly, a charge for compensation expense is recorded to SG&A expense for the difference between the fair market value and the discounted purchase price of the Company's common stock. During fiscal 2023 and fiscal 2022, 16,905 and 9,525 shares of common stock, respectively, were issued under the ESPP. As of February 3, 2024, there were 43,670 shares available for future issuance under the ESPP.F-21
 Stock OptionsA summary of stock option activity for fiscal 2023 is as follows: 





















 
 
Stock Options
 
 
Weighted Average Exercise Price
 
 
Weighted Average Remaining Contractual Term (years)
 
 
Aggregate Intrinsic Value(in thousands)
 


Outstanding at January 28, 2023
 
 
58
 
 
$
38.77
 
 
 
2.7
 
 
$
—
 


Granted
 
 
—
 
 
$
—
 
 
 
 
 
 
 


Exercised
 
 
—
 
 
$
—
 
 
 
 
 
 
 


Forfeited or expired
 
 
(58
)
 
$
38.77
 
 
 
 
 
 
 


Outstanding at February 3, 2024
 
 
—
 
 
$
—
 
 
 
—
 
 
$
—
 


 
 
 
 
 
 
 
 
 
 
 
 
 


Vested and exercisable at February 3, 2024
 
 
—
 
 
$
—
 
 
 
—
 
 
$
—
 

Restricted Stock UnitsA summary of restricted stock unit activity for fiscal 2023 is as follows: 













 
 
Restricted Stock Units
 
 
Weighted Average Grant Date Fair Value
 


Non-vested restricted stock units at January 28, 2023
 
 
550,293
 
 
$
9.44
 


Granted
 
 
181,573
 
 
$
3.46
 


Vested
 
 
(184,243
)
 
$
9.85
 


Forfeited
 
 
(73,520
)
 
$
8.89
 


Non-vested restricted stock units at February 3, 2024
 
 
474,103
 
 
$
7.07
 

The total fair value of restricted stock units vested during fiscal 2023 and fiscal 2022 was $1,815 and $2,543, respectively.At February 3, 2024, there was $2,267 of unrecognized compensation costs related to restricted stock units that will be recognized over a remaining weighted average period of 1.4 years.Share-Based Compensation ExpenseDuring fiscal 2023, the Company recognized share-based compensation expense of $1,541, including expense of $281 related to non-employees, and related tax benefit of $0. During fiscal 2022, the Company recognized share-based compensation expense of $2,095, including expense of $301 related to non-employees, and related tax benefit of $0. 
Note 8. Defined Contribution Plan
The Company maintains a defined contribution plan for employees who meet certain eligibility requirements. As of March 8, 2021, all assets from the Rebecca Taylor, Inc. 401(k) Plan were merged into the Vince Holding Corp. 401(k) Plan. Features of these plans allow participants to contribute to a plan a percentage of their annual compensation, subject to IRS limitations. Certain plans also provide for discretionary matching contributions by the Company. The annual expense incurred by the Company for the defined contribution plan was $514 and $571 in fiscal 2023 and fiscal 2022, respectively. 
Note 9. Stockholders' EquityCommon StockThe Company currently has authorized for issuance 100,000,000 shares of its voting common stock, par value of $0.01 per share. As of February 3, 2024 and January 28, 2023, the Company had 12,506,556 and 12,335,405 shares issued and outstanding, respectively.F-22
 At-the-Market OfferingOn September 9, 2021, the Company filed a shelf registration statement on Form S-3, which was declared effective on September 21, 2021 (the "Registration Statement"). Under the Registration Statement, the Company may offer and sell up to 3,000,000 shares of common stock from time to time in one or more offerings at prices and terms to be determined at the time of the sale. On June 30, 2023, the Company entered into a Sales Agreement with Virtu Americas LLC ("Virtu"), as sales agent and/or principal (the "Virtu At-the-Market Offering") under which, the Company may sell from time to time through Virtu shares of the Company's common stock, par value $0.01 per share, having an offering price of up to $7,825. Any shares will be issued pursuant to the Company's Registration Statement. During the year ended February 3, 2024, the Company did not make any offerings or sales of shares of common stock under the Virtu At-the-Market Offering. At February 3, 2024, $7,825 was available under the Virtu At-the-Market Offering.The Company previously entered into an Open Market Sale AgreementSM with Jefferies LLC ("At-the-Market Offering"), under which the Company was able to offer and sell, from time to time, up to 1,000,000 shares of common stock, par value $0.01 per share, which shares were included in the securities registered pursuant to the Registration Statement. Effective June 29, 2023, the Company terminated the Jefferies At-the-Market Offering.  During the year ended February 3, 2024, the Company did not make any offerings or sales of shares of common stock under the Jefferies At-the-Market Offering.  During the year ended January 28, 2023, the Company issued and sold 104,980 shares of common stock under the Jefferies At-the-Market Offering for aggregate net proceeds of $825, at an average price of $7.86 per share. DividendsThe Company has not paid dividends, and the Company's current ability to pay such dividends is restricted by the terms of its debt agreements. The Company's future dividend policy will be determined on a yearly basis and will depend on earnings, financial condition, capital requirements, and certain other factors. The Company does not expect to declare dividends with respect to its common stock in the foreseeable future.
Note 10. Earnings (Loss) Per ShareBasic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Except when the effect would be anti-dilutive, diluted earnings (loss) per share is calculated based on the weighted average number of shares of common stock outstanding plus the dilutive effect of share-based awards calculated under the treasury stock method. In periods when the Company incurs a net loss, share-based awards are excluded from the calculation of earnings per share as their inclusion would have an anti-dilutive effect.The following is a reconciliation of weighted average basic shares to weighted average diluted shares outstanding: 













 
 
Fiscal Year
 


 
 
2023
 
 
2022
 


Weighted-average shares—basic
 
 
12,442,781
 
 
 
12,223,004
 


Effect of dilutive equity securities
 
 
35,434
 
 
 
—
 


Weighted-average shares—diluted
 
 
12,478,215
 
 
 
12,223,004
 

For the fiscal year ended February 3, 2024, 391,102 weighted average shares of share-based compensation were excluded from the computation of weighted average shares for diluted earnings per share, as their effect would have been anti-dilutive.  For the fiscal year ended January 28, 2023, because the Company incurred a net loss weighted-average basic shares and weighted-average diluted shares outstanding are equal for this period.
F-23

 
Note 11. Income TaxesThe (benefit) provision for income taxes consisted of the following: 














 
Fiscal Year
 


(in thousands)
2023
 
 
 
2022
 


Current:
 
 
 
 
 
 
 


Domestic:
 
 
 
 
 
 


Federal
$
—
 
 
 
$
—
 


State
 
514
 
 
 
 
132
 


Foreign
 
29
 
 
 
 
39
 


Total current
 
543
 
 
 
 
171
 


Deferred:
 
 
 
 
 
 


Domestic:
 
 
 
 
 
 


Federal
 
(2,017
)
 
 
 
1,141
 


State
 
(2,004
)
 
 
 
1,725
 


Foreign
 
—
 
 
 
 
—
 


Total deferred
 
(4,021
)
 
 
 
2,866
 


Total (benefit) provision for income taxes
$
(3,478
)
 
 
$
3,037
 

The sources of income (loss) before income taxes and equity in net income of equity method investment are from the United States, the Company's subsidiaries in the United Kingdom and the Company's French branch. The Company files U.S. federal income tax returns and income tax returns in various state and local jurisdictions.Current income taxes are the amounts payable under the respective tax laws and regulations on each year's earnings. Deferred income tax assets and liabilities represent the tax effects of revenues, costs and expenses, which are recognized for tax purposes in different periods from those used for financial statement purposes.The benefit for income taxes was $3,478 for the year ended February 3, 2024.  This benefit was primarily driven by a tax benefit of $5,523 associated with the Authentic Transaction primarily due to the reversal of a portion of the non-cash deferred tax liability previously created by the amortization of the Vince tradename indefinite-lived intangible asset recognized for tax, but not for book purposes, which previously could not be used as a source to support the realization of certain deferred tax assets related to the Company's net operating losses. This benefit was offset by a portion of the non-cash deferred tax liability related to the Company's equity method investment which cannot be used as a source of income to support the realization of certain deferred tax assets related to the Company's net operating losses which resulted in deferred tax expense of $1,907. The provision for income taxes was $3,037 for the year ended January 28, 2023 and primarily represents the non-cash deferred tax expense created by the current period amortization of indefinite-lived goodwill and intangible assets for tax but not for book purposes. A portion of these deferred tax liabilities cannot be used as a source to support the realization of certain deferred tax assets related to the Company's net operating losses which results in tax expense to record these deferred tax liabilities. A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows: 














 
Fiscal Year
 


 
2023
 
 
 
2022
 


Statutory federal rate
 
21.0
%
 
 
 
 
21.0
%


State taxes, net of federal benefit
 
12.0
%
 
 
 
5.2
%


NOL Adjustments
 
6.7
%
 
 
 
0.0
%


Deferred Adjustments
 
3.6
%
 
 
 
0.0
%


Valuation allowance
 
(61.3
)%
 
 
 
(33.6
)%


Return to provision adjustment
 
0.2
%
 
 
 
0.2
%


Non-deductible Officers Compensation
 
0.3
%
 
 
 
(0.4
)%


Rate Differential on Foreign Income
 
0.4
%
 
 
 
(0.1
)%


Other
 
0.1
%
 
 
 
(0.9
)%


Total
 
(17.0
)%
 
 
 
(8.6
)%

 F-24
 Deferred income tax assets and liabilities consisted of the following: 












 
February 3,
 
 
January 28,
 


(in thousands)
2024
 
 
2023
 


Deferred tax assets:
 
 
 
 
 


Depreciation and amortization
$
2,706
 
 
$
4,166
 


Employee related costs
 
426
 
 
 
1,049
 


Allowance for asset valuations
 
1,664
 
 
 
1,861
 


Accrued expenses
 
317
 
 
 
472
 


Lease liability
 
22,601
 
 
 
24,326
 


Net operating losses
 
122,382
 
 
 
138,702
 


Tax credits
 
92
 
 
 
92
 


Interest expense
 
5,428
 
 
 
3,348
 


Other
 
288
 
 
 
305
 


Total deferred tax assets
 
155,904
 
 
 
174,321
 


Less: valuation allowances
 
(125,913
)
 
 
(138,490
)


Net deferred tax assets
 
29,991
 
 
 
35,831
 


Deferred tax liabilities:
 
 
 
 
 


Indefinite lived intangibles
 
(8,584
)
 
 
(25,742
)


ROU assets
 
(19,548
)
 
 
(19,023
)


Equity method investment
 
(6,772
)
 
 
—
 


Total deferred tax liabilities
 
(34,904
)
 
 
(44,765
)


Net deferred tax (liability) asset
$
(4,913
)
 
$
(8,934
)


Included in:
 
 
 
 
 


Deferred income tax asset
$
—
 
 
$
—
 


Deferred income tax liability
 
(4,913
)
 
 
(8,934
)


Net deferred tax liability
$
(4,913
)
 
$
(8,934
)

As of February 3, 2024, the Company had a gross federal net operating loss of $464,232 (federal tax effected amount of $97,489) for federal income tax purposes that may be used to reduce future federal taxable income. The net operating losses for federal income tax purposes of $224,976 will expire between 2032 and 2038 for losses incurred in tax years beginning before January 1, 2018. Net operating losses of $239,257 incurred in tax years beginning after January 1, 2018 will have an indefinite carryforward period.As of February 3, 2024, the Company had gross state net operating loss carryforward of $656,751 (tax effected net of federal benefit of $25,274) that may be used to reduce future state taxable income. The net operating loss carryforwards for state income tax purposes expire between 2028 and 2043.As of February 3, 2024, the Company had total deferred tax assets including net operating loss carryforwards, reduced for uncertain tax positions, of $121,000, of which $95,720 and $25,280 were attributable to federal and domestic state and local jurisdictions, respectively.The valuation allowance for deferred tax assets was $125,913 at February 3, 2024, decreasing $12,577 from the valuation allowance for deferred tax assets of $138,490 at January 28, 2023. During fiscal 2023, the Company maintained a full valuation allowance on all deferred tax assets that have a definite life as the Company does not believe it is more likely than not that such deferred tax assets will be recognized. Indefinite-lived net operating losses have been recognized to the extent the Company believes they can be utilized against indefinite-lived deferred tax liabilities. Adjustments to the valuation allowance are made when there is a change in management's assessment of the amount of deferred tax assets that are realizable.A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties, is as follows: 












 
Fiscal Year
 


(in thousands)
2023
 
 
2022
 


Beginning balance
$
556
 
 
$
556
 


Increases for tax positions in current year
 
—
 
 
 
—
 


Increases for tax positions in prior years
 
—
 
 
 
—
 


Decreases for tax positions in prior years
 
—
 
 
 
—
 


Ending balance
$
556
 
 
$
556
 


 
 
 
 
 
 

 F-25
 As of February 3, 2024 and January 28, 2023, the Company had unrecognized tax benefits in the amount of $556, which would not impact the Company's effective tax rate if recognized. The statute of limitations does not begin until the net operating losses are utilized. Therefore, the unrecognized tax benefit balance will remain the same until three years after the net operating losses are used to offset taxable income. The Company includes accrued interest and penalties on underpayments of income taxes in its income tax provision. As of February 3, 2024 and January 28, 2023, the Company did not have any interest and penalties accrued on its Consolidated Balance Sheets and no related provision or benefit was recognized in each of the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended February 3, 2024 and January 28, 2023. Interest is computed on the difference between the tax position recognized net of any unrecognized tax benefits and the amount previously taken or expected to be taken in the Company's tax returns.With limited exceptions, fiscal years January 30, 2021 through February 3, 2024 remain subject to examination. For years prior to 2021, adjustments can be made by the taxing authorities only to the extent of the net operating losses carried forward. 
Note 12. LeasesThe Company determines if a contract contains a lease at inception. The Company has operating leases for real estate (primarily retail stores, storage, and office spaces) some of which have initial terms of 10 years, and in many instances can be extended for an additional term, while the Company's more recent leases are subject to shorter terms as a result of the implementation of the strategy to pursue shorter lease terms. The Company will not include renewal options in the underlying lease term unless the Company is reasonably certain to exercise the renewal option. Substantially all of the Company's leases require a fixed annual rent, and most require the payment of additional rent if store sales exceed a negotiated amount. These percentage rent expenses are considered as variable lease costs and are recognized in the consolidated financial statements when incurred. In addition, the Company's real estate leases may also require additional payments for real estate taxes and other occupancy-related costs which it considers as non-lease components.ROU assets and operating lease liabilities are recognized based upon the present value of the future lease payments over the lease term. As the Company's leases do not provide an implicit borrowing rate, the Company uses an estimated incremental borrowing rate based upon a combination of market-based factors, such as market quoted forward yield curves and company specific factors, such as the Company's credit rating, lease size and duration to calculate the present value. The Company does not have any finance leases. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The weighted-average remaining lease term and weighted-average discount rate for our operating leases are 6.3 years and 7.17% as of February 3, 2024 and 6.0 years and 6.4% as of January 28, 2023. Total lease cost is included in SG&A expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) and is recorded net of immaterial sublease income. Some leases have a non-cancelable lease term of less than one year and therefore, the Company has elected to exclude these short-term leases from the ROU asset and lease liabilities. Short term lease costs were immaterial for the fiscal years ended February 3, 2024 and January 28, 2023. The Company's lease cost is comprised of the following: 













 
 
Fiscal Year
 


(in thousands)
 
2023
 
 
2022
 


Operating lease cost
 
$
18,482
 
 
$
23,853
 


Variable operating lease cost
 
 
390
 
 
 
547
 


Total lease cost
 
$
18,872
 
 
$
24,400
 

 The operating lease cost for the year ended February 3, 2024, included a benefit of $779 for the correction of an error recorded within SG&A expenses related to a lease modification that occurred during fiscal 2022 for a Vince retail store, leading to an overstatement of the ROU assets and an overstatement of the lease obligations in fiscal 2022.The operating lease cost for fiscal 2022 included $4,090 of accelerated amortization and a $1,987 benefit from the release of operating lease liabilities associated with the wind down of the Rebecca Taylor business. See Note 2 "Recent Transactions" for additional information. Additionally, the operating lease cost for fiscal 2022 included a benefit of $532 for the correction of an error recorded within SG&A expenses related to various lease amendments signed during fiscal 2021 for certain Vince retail stores that were relocated during fiscal 2022, leading to an overstatement of the ROU assets and an overstatement of the lease obligations in fiscal 2021.F-26
 Supplemental cash flow and non-cash information related to leases is as follows: 













 
 
Fiscal Year
 


(in thousands)
 
2023
 
 
2022
 


Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
 
 


Operating cash flows from operating leases
 
$
24,766
 
 
$
28,203
 


Right-of-use assets obtained in exchange for operating lease liabilities
 
 
22,972
 
 
 
5,957
 

As of February 3, 2024, the future maturity of lease liabilities are as follows: 











 
 
 
 
February 3,
 


(in thousands)
 
 
 
2024
 


Fiscal 2024
 
 
 
$
22,006
 


Fiscal 2025
 
 
 
 
18,759
 


Fiscal 2026
 
 
 
 
14,863
 


Fiscal 2027
 
 
 
 
11,066
 


Fiscal 2028
 
 
 
 
10,167
 


Thereafter
 
 
 
 
29,285
 


Total lease payments
 
 
 
 
106,146
 


Less: Imputed interest
 
 
 
 
(21,638
)


Total operating lease liabilities
 
 
 
$
84,508
 

The operating lease payments do not include any renewal options as such leases are not reasonably certain of being renewed as of February 3, 2024 and do not include $2,211 legally binding minimum lease payments for leases signed but not yet commenced. 
Note 13. Segment and Geographical Financial InformationThe Company has identified three reportable segments, as further described below. Management considered both similar and dissimilar economic characteristics, internal reporting and management structures, as well as products, customers, and supply chain logistics to identify the following reportable segments:•Vince Wholesale segment—consists of the Company's operations to distribute Vince brand products to major department stores and specialty stores in the United States and select international markets; •Vince Direct-to-consumer segment—consists of the Company's operations to distribute Vince brand products directly to the consumer through its Vince branded full-price specialty retail stores, outlet stores, e-commerce platform, and its subscription service Vince Unfold; and•Rebecca Taylor and Parker segment—consisted of the Company's operations to distribute Rebecca Taylor and Parker brand products to high-end department and specialty stores in the U.S. and select international markets, directly to the consumer through their own branded e-commerce platforms and Rebecca Taylor retail and outlet stores, and through its subscription service Rebecca Taylor RNTD. On September 12, 2022, the Company announced its decision to wind down the Rebecca Taylor business. On December 22, 2022, the Company's indirectly wholly owned subsidiary, Rebecca Taylor, Inc., completed the sale of its intellectual property and certain related ancillary assets to RT IPCO, LLC, an affiliate of Ramani Group. See Note 2 "Recent Transactions" for further details. Substantially all Rebecca Taylor inventory was liquidated as of January 28, 2023. Additionally, all Rebecca Taylor retail and outlet stores operated by the Company were closed as of January 28, 2023 and the e-commerce site operated by the Company ceased in December 2022.On February 17, 2023, the Company's indirectly wholly owned subsidiary, Parker Lifestyle, LLC, completed the sale of its intellectual property and certain related ancillary assets to Parker IP Co. LLC, an affiliate of BCI Brands. See Note 2 "Recent Transactions" for additional information.The accounting policies of the Company's reportable segments are consistent with those described in Note 1 "Description of Business and Summary of Significant Accounting Policies." Unallocated corporate expenses are related to the Vince brand and are comprised of SG&A expenses attributable to corporate and administrative activities (such as marketing, design, finance, information technology, legal and human resource departments), and other charges that are not directly attributable to the Company's Vince Wholesale and Vince Direct-to-consumer reportable segments. Unallocated corporate assets are related to the Vince brand and are F-27
 comprised of the carrying values of the Company's goodwill, equity method investment and other assets that will be utilized to generate revenue for the Company's Vince Wholesale and Vince Direct-to-consumer reportable segments.Summary information for the Company's reportable segments is presented below.  

























(in thousands)
 
Vince Wholesale
 
 
Vince Direct-to-consumer
 
 
Rebecca Taylor and Parker
 
 
Unallocated Corporate
 
 
Total
 


Fiscal Year 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Net Sales (1)
 
$
149,603
 
 
$
143,096
 
 
$
191
 
 
$
—
 
 
$
292,890
 


Income (loss) before income taxes and equity in net income of equity method investment (2) (3)
 
 
43,416
 
 
 
5,774
 
 
 
2,443
 
 
 
(31,127
)
 
 
20,506
 


Depreciation & Amortization
 
 
248
 
 
 
2,931
 
 
 
—
 
 
 
1,760
 
 
 
4,939
 


Capital Expenditures
 
 
127
 
 
 
1,191
 
 
 
—
 
 
 
142
 
 
 
1,460
 


Total Assets
 
 
51,489
 
 
 
87,648
 
 
 
—
 
 
 
86,012
 
 
 
225,149
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Fiscal Year 2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Net Sales (4)
 
$
169,375
 
 
$
149,770
 
 
$
38,297
 
 
$
—
 
 
$
357,442
 


Income (loss) before income taxes and equity in net income of equity method investment (5) (6)
 
 
43,592
 
 
 
2,397
 
 
 
(21,255
)
 
 
(60,043
)
 
 
(35,309
)


Depreciation & Amortization
 
 
689
 
 
 
2,976
 
 
 
2,763
 
 
 
1,906
 
 
 
8,334
 


Capital Expenditures
 
 
100
 
 
 
2,007
 
 
 
177
 
 
 
498
 
 
 
2,782
 


Total Assets
 
 
83,134
 
 
 
95,499
 
 
 
981
 
 
 
123,731
 
 
 
303,345
 

 (1) Net sales for the Rebecca Taylor and Parker reportable segment for fiscal 2023 consisted of $191 through wholesale distribution channels of residual revenue contracted prior to the sale of the Rebecca Taylor tradename.(2) The Rebecca Taylor and Parker reportable segment for fiscal 2023 includes a $765 gain associated with the sale of the Parker tradename, a net benefit of $1,750 from the wind down of the Rebecca Taylor business, and $150 of transaction related expenses associated with the sale of the Parker tradename. See Note 2 "Recent Transactions" for further information.(3) Unallocated Corporate for fiscal 2023 includes the $32,043 gain associated with the Asset Sale and $5,030 of transaction related expenses associated with the Asset Sale. See Note 2 "Recent Transactions" for further information.(4) Net sales for the Rebecca Taylor and Parker reportable segment for fiscal 2022 consisted of $18,508 through wholesale distribution channels and $19,789 through direct-to-consumer distribution channels.(5) Vince Direct-to-consumer reportable segment for fiscal 2022 includes a non-cash impairment charge of $1,014 related to property and equipment. See Note 1 "Description of Business and Summary of Significant Accounting Policies – (J) Impairment of Long-lived Assets" for additional information.(6) Rebecca Taylor and Parker reportable segment for fiscal 2022 includes a non-cash impairment charge of $2,566, of which $1,700 is related to the Rebecca Taylor tradename and $866 is related to property and equipment. See Note 1 "Description of Business and Summary of Significant Accounting Policies – (J) Impairment of Long-lived Assets and (K) Goodwill and Other Intangible Assets" for additional information. Fiscal 2022 also includes a $1,620 gain associated with the sale of the Rebecca Taylor tradename as well as charges associated with the wind down of the Rebecca Taylor business. See Note 2 "Recent Transactions" for additional information.The Company is domiciled in the U.S. and as of February 3, 2024, had no significant international subsidiaries and therefore substantially all of the Company's sales originate in the U.S. As a result, net sales by destination are not provided. Additionally, substantially all long-lived assets, including property and equipment, are located in the U.S.
F-28

 
Note 14. Related Party TransactionsOperating Agreement On May 25, 2023, Vince, LLC and ABG Vince entered into the Operating Agreement, which, among other things, provides for the management of the business and the affairs of ABG Vince, the allocation of profits and losses, the distribution of cash of ABG Vince among its members and the rights, obligations and interests of the members to each other and to Vince, LLC. See Note 2 "Recent Transactions" for further information. During fiscal 2023, the Company received $1,341 of cash distributions under the Operating Agreement. License Agreement On May 25, 2023, Vince, LLC and ABG Vince entered into the License Agreement, whereby Vince, LLC is required to pay ABG Vince a royalty on net sales of Licensed Products and committed to an annual guaranteed minimum royalty of $11,000. See Note 2 "Recent Transactions" for further information. During fiscal 2023, the Company paid $6,945 under the License Agreement related to fiscal 2023. Third Lien Credit AgreementOn December 11, 2020, Vince, LLC entered into the $20,000 Third Lien Credit Facility pursuant to the Third Lien Credit Agreement, by and among Vince, LLC, as the borrower, SK Financial, as agent and lender, and other lenders from time-to-time party thereto. SK Financial is an affiliate of Sun Capital, whose affiliates own, as of February 3, 2024, approximately 68% of the Company's common stock. The Third Lien Credit Facility was reviewed and approved by the Special Committee of the Company's Board of Directors, consisting solely of directors not affiliated with Sun Capital, which committee was represented by independent legal advisors. See Note 5 "Long-Term Debt and Financing Arrangements" for additional information.Tax Receivable AgreementVHC entered into a Tax Receivable Agreement with the Pre-IPO Stockholders on November 27, 2013, which expired in November of 2023 with no outstanding obligations due from the Company.  The Company and its former subsidiaries generated certain tax benefits (including net operating losses and tax credits) prior to the Restructuring Transactions consummated in connection with the Company's IPO and will generate certain section 197 intangible deductions (the "Pre-IPO Tax Benefits"), which would reduce the actual liability for taxes that the Company might otherwise be required to pay. The Tax Receivable Agreement provided for payments to the Pre-IPO Stockholders in an amount equal to 85% of the aggregate reduction in taxes payable realized by the Company and its subsidiaries from the utilization of the Pre-IPO Tax Benefits.  The Tax Receivable Agreement terminated per its terms on February 3, 2024.   As of February 3, 2024, the Company's total obligation under the Tax Receivable Agreement was $0. Sun Capital Consulting AgreementOn November 27, 2013, the Company entered into an agreement with Sun Capital Management to (i) reimburse Sun Capital Management Corp. ("Sun Capital Management") or any of its affiliates providing consulting services under the agreement for out-of-pocket expenses incurred in providing consulting services to the Company and (ii) provide Sun Capital Management with customary indemnification for any such services.The initial term of the agreement expired on November 27, 2023, the tenth anniversary of the Company's IPO, and the agreement currently is automatically extended on a year-to-year basis. Under the consulting agreement, the Company has no obligation to pay Sun Capital Management or any of its affiliates any consulting fees other than those which are approved by a majority of the Company's directors that are not affiliated with Sun Capital. To the extent such fees are approved in the future, the Company will be obligated to pay such fees in addition to reimbursing Sun Capital Management or any of its affiliates that provide the Company services under the consulting agreement for all reasonable out-of-pocket fees and expenses incurred by such party in connection with the provision of consulting services under the consulting agreement and any related matters. Reimbursement of such expenses shall not be conditioned upon the approval of a majority of the Company's directors that are not affiliated with Sun Capital Management and shall be payable in addition to any fees that such directors may approve.Neither Sun Capital Management nor any of its affiliates are liable to the Company or the Company's affiliates, security holders or creditors for (1) any liabilities arising out of, related to, caused by, based upon or in connection with the performance of services under the consulting agreement, unless such liability is proven to have resulted directly and primarily from the willful misconduct or gross negligence of such person or (2) pursuing any outside activities or opportunities that may conflict with the Company's best interests, which outside activities the Company consents to and approves under the consulting agreement, and which opportunities neither Sun Capital Management nor any of its affiliates will have any duty to inform the Company of. In no event will the aggregate F-29
 of any liabilities of Sun Capital Management or any of its affiliates exceed the aggregate of any fees paid under the consulting agreement.In addition, the Company is required to indemnify Sun Capital Management, its affiliates and any successor by operation of law against any and all liabilities, whether or not arising out of or related to such party's performance of services under the consulting agreement, except to the extent proven to result directly and primarily from such person's willful misconduct or gross negligence. The Company is also required to defend such parties in any lawsuits which may be brought against such parties and advance expenses in connection therewith. In the case of affiliates of Sun Capital Management that have rights to indemnification and advancement from affiliates of Sun Capital, the Company agrees to be the indemnitor of first resort, to be liable for the full amounts of payments of indemnification required by any organizational document of such entity or any agreement to which such entity is a party, and that the Company will not make any claims against any affiliates of Sun Capital Partners for contribution, subrogation, exoneration or reimbursement for which they are liable under any organizational documents or agreement. Sun Capital Management may, in its sole discretion, elect to terminate the consulting agreement at any time. The Company may elect to terminate the consulting agreement if SCSF Cardinal, Sun Cardinal, or any of their respective affiliates' aggregate ownership of the Company's equity securities falls below 30%.During fiscal 2023 and fiscal 2022, the Company incurred expenses of $10 and $12, respectively, under the Sun Capital Consulting Agreement. Indemnification AgreementsThe Company has entered into indemnification agreements with each of its executive officers and directors. The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the Delaware General Corporation Law.Amended and Restated Certificate of IncorporationThe Company's amended and restated certificate of incorporation provides that for so long as affiliates of Sun Capital own 30% or more of the Company's outstanding shares of common stock, Sun Cardinal, a Sun Capital affiliate, has the right to designate a majority of the Company's board of directors. For so long as Sun Cardinal has the right to designate a majority of the Company's board of directors, the directors designated by Sun Cardinal may constitute a majority of each committee of the Company's board of directors (other than the Audit Committee), and the chairman of each of the committees (other than the Audit Committee) may be a director serving on the committee who is selected by affiliates of Sun Capital, provided that, at such time as the Company is not a "controlled company" under the NYSE corporate governance standards, the Company's committee membership will comply with all applicable requirements of those standards and a majority of the Company's board of directors will be "independent directors," as defined under the rules of the NYSE, subject to any applicable phase in requirements.
F-30

 
SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS(In thousands) 





















 
 
Beginning of Period
 
 
Expense Charges, net of Reversals
 
 
Deductions and Write-offs
 
 
End of Period
 


Sales Allowances
 
 
 
 
 
 
 
 
 
 
 
 


Fiscal 2023
 
$
(8,106
)
 
$
(48,854
)
 
$
51,750
 
 
$
(5,210
)


Fiscal 2022
 
 
(6,557
)
 
$
(57,276
)
 
$
55,727
 
 
$
(8,106
)


Allowance for Doubtful Accounts
 
 
 
 
 
 
 
 
 
 
 
 


Fiscal 2023
 
 
(759
)
 
 
(104
)
 
 
486
 
 
 
(377
)


Fiscal 2022
 
 
(379
)
 
 
(424
)
 
 
44
 
 
 
(759
)


Valuation Allowances on Deferred Income Taxes
 
 
 
 
 
 
 
 
 
 
 
 


Fiscal 2023
 
 
(138,490
)
 
 
12,577
 
 *
 
—
 
 
 
(125,913
)


Fiscal 2022
 
 
(126,640
)
 
 
(11,850
)
 
 
—
 
 
 
(138,490
)


 
 
 
 
 
 
 
 
 
 
 
 
 


*Includes reversal of valuation allowance associated with realization of NOLs related to the tax gain recognized for the Authentic Transaction.  See Note 2 "Recent Transactions" to the Consolidated Financial Statements in this Annual Report for additional information on the Authentic Transaction.
 


 
F-31

